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Delisted firms and momentum profits

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  • Eisdorfer, Assaf

Abstract

I find that approximately 40 percent of the momentum profit is generated by delisting returns. Most of the delisting-profit is derived from bankrupt firms, while merged firms have a minor effect on the momentum profitability. I further show that ex-ante, firms with high likelihood to go bankrupt exhibit stronger momentum, and firms with high likelihood to be merged exhibit weaker momentum; and that almost the entire profits of these bankruptcy- and merger-candidates strategies are generated by delisting returns. These findings have implications on the size and the implementability of momentum.

Suggested Citation

  • Eisdorfer, Assaf, 2008. "Delisted firms and momentum profits," Journal of Financial Markets, Elsevier, vol. 11(2), pages 160-179, May.
  • Handle: RePEc:eee:finmar:v:11:y:2008:i:2:p:160-179
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    References listed on IDEAS

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    Cited by:

    1. Menkhoff, Lukas & Sarno, Lucio & Schmeling, Maik & Schrimpf, Andreas, 2012. "Currency momentum strategies," Journal of Financial Economics, Elsevier, vol. 106(3), pages 660-684.
    2. Kimmel, Randall K. & Thornton, John H. & Bennett, Sara E., 2016. "Can statistics-based early warning systems detect problem banks before markets?," The North American Journal of Economics and Finance, Elsevier, vol. 37(C), pages 190-216.
    3. Novotný, Jan & Petrov, Dmitri & Urga, Giovanni, 2015. "Trading price jump clusters in foreign exchange markets," Journal of Financial Markets, Elsevier, vol. 24(C), pages 66-92.
    4. Bhootra, Ajay, 2011. "Are momentum profits driven by the cross-sectional dispersion in expected stock returns?," Journal of Financial Markets, Elsevier, vol. 14(3), pages 494-513, August.

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