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Firm-specific versus systematic momentum

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  • Graef, Frank
  • Hoechle, Daniel
  • Schmid, Markus

Abstract

We decompose stock returns into a systematic and a firm-specific component and show that the dynamics of the firm-specific return component drive the well-known stock momentum anomaly. Our results are robust to the use of a variety of prominent factor models for return decomposition. Furthermore, we find that momentum profits are largely unaffected when the investment universe is restricted to stocks with inconspicuous factor loadings. Our empirical findings call into question the transmission mechanism from factor momentum to stock momentum proposed in recent research.

Suggested Citation

  • Graef, Frank & Hoechle, Daniel & Schmid, Markus, 2025. "Firm-specific versus systematic momentum," Finance Research Letters, Elsevier, vol. 76(C).
    • Handle: RePEc:eee:finlet:v:76:y:2025:i:c:s1544612325002272
    DOI: 10.1016/j.frl.2025.106963
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    References listed on IDEAS

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    More about this item

    Keywords

    Factor momentum; Firm-specific momentum; Factor timing;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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