Understanding momentum and reversal

• 成果类型: Article
• 署名作者: Kelly, Bryan T.; Moskowitz, Tobias J.; Pruitt, Seth
• 署名单位: Yale University; Arizona State University; Arizona State University-Tempe
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2020.06.024
• 发表日期: 2021
• 页码: 726-743
• 关键词: momentum; reversal; factor model; Conditional betas; Conditional expected returns; IPCA

摘要

Stock momentum, long-term reversal, and other past return characteristics that predict future returns also predict future realized betas, suggesting these characteristics capture time-varying risk compensation. We formalize this argument with a conditional factor pricing model. Using instrumented principal components analysis, we estimate latent factors with time-varying factor loadings that depend on observable firm characteristics. We show that factor loadings vary significantly over time, even at short horizons over which the momentum phenomenon operates (one year), and this variation captures reliable conditional risk premia missed by other factor models commonly used in the literature. Our estimates of conditional risk exposure can explain a sizable fraction of momentum and long-term reversal returns and can be used to generate even stronger return predictions. (c) 2021 Elsevier B.V. All rights reserved.