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Macroeconomic risk and seasonality in momentum profits

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  • Ji, Xiuqing
  • Martin, J. Spencer
  • Yao, Yaqiong

Abstract

We contribute to the growing debate on the relation between macroeconomic risk and stock price momentum. Not only is momentum seasonal, so is its net factor exposure. We show that winners and losers only differ in macroeconomic factor loadings in January, the one month when losers overwhelmingly outperform winners. In the remainder of the year, when momentum does exist, winner and loser factor loadings offset nearly completely. Furthermore, the magnitude of macroeconomic risk premia appears to seasonally vary contra momentum. In contrast, the relatively new profitability factor does a much better job of capturing the described seasonality.

Suggested Citation

  • Ji, Xiuqing & Martin, J. Spencer & Yao, Yaqiong, 2017. "Macroeconomic risk and seasonality in momentum profits," Journal of Financial Markets, Elsevier, vol. 36(C), pages 76-90.
    • Handle: RePEc:eee:finmar:v:36:y:2017:i:c:p:76-90
    DOI: 10.1016/j.finmar.2017.04.002
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    Cited by:

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    More about this item

    Keywords

    Momentum; Macroeconomic risk; ROE; Seasonality; January effects;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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