IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-00956948.html

The relevance of information and trading costs in explaining momentum profits: Evidence from optioned and non-optioned stocks

Author

Listed:
  • Sina Badreddine
  • Emilios C. C Galariotis

    (Audencia Business School)

  • Phil Holmes

Abstract

Considerable evidence from many countries suggests momentum strategies generate profits. These have been difficult to rationalise and evidence on the sources of such profitability is inconclusive. We utilise a sample of optioned stocks, characterised by high liquidity, high market capitalisation and fewer short sales constraints and compare results with control samples of non optioned stocks chosen on the basis of market value, turnover and bid-ask spread. The sample characteristics, and the fact that derivatives improve the impounding of information into prices, enable us to draw conclusions about the causes of momentum profits. While we find that short sales constraints are not the major driver of profitability and that most momentum profits disappear using two transactions costs measures of the bid-ask spread, one not previously used, the persistence of some momentum profits indicates that the market underreacts even to the most publicly available information.

Suggested Citation

  • Sina Badreddine & Emilios C. C Galariotis & Phil Holmes, 2012. "The relevance of information and trading costs in explaining momentum profits: Evidence from optioned and non-optioned stocks," Post-Print hal-00956948, HAL.
    • Handle: RePEc:hal:journl:hal-00956948
    DOI: 10.1016/j.intfin.2012.03.001
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a
    for a similarly titled item that would be available.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ülkü, Numan & Prodan, Eugeniu, 2013. "Drivers of technical trend-following rules' profitability in world stock markets," International Review of Financial Analysis, Elsevier, vol. 30(C), pages 214-229.
    2. Sina Badreddine & Ephraim Clark, 2021. "The asymmetric effects of industry specific volatility in momentum returns," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 6444-6458, October.
    3. Emilios C. C Galariotis & Phil Holmes & Vasileios Kallinterakis & Xiaodong S. Ma, 2014. "Market states, expectations, sentiment and momentum: How naive are investors?," Post-Print hal-00943345, HAL.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-00956948. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.