Buy-Side Competition and Momentum Profits

• 成果类型: Article
• 署名作者: Hoberg, Gerard; Kumar, Nitin; Prabhala, Nagpurnanand
• 署名单位: University of Southern California; Indian School of Business (ISB); Johns Hopkins University
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhab016
• 发表日期: 2022
• 页码: 254
• 关键词: cross-section; INFORMATION UNCERTAINTY; MARKET; returns; RISK; performance; underreaction; industries; forecasts; earnings

摘要

We show that a new measure of buy-side competition explains momentum profits. The momentum quintile spread is 1.11% when competition is low and negligible when competition is high. Better alphas are attained with superior Sharpe and Sortino ratios, with no negative skewness, and in more investible strategies featuring value-weighted portfolios and large capitalization stocks. Stock characteristics traditionally related to momentum do not explain our results. Tests based on long-term reversals, the trading patterns of funds, their style peers, distant funds, and retail investors suggest that slow information diffusion explains the large momentum spreads and momentum reversals in low competition markets.