The illusory nature of momentum profits

• 成果类型: Article
• 署名作者: Lesmond, DA; Schill, MJ; Zhou, CS
• 署名单位: University of Virginia; Tulane University; Peking University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/S0304-405X(03)00206-X
• 发表日期: 2004
• 页码: 349-380
• 关键词: trading strategies; momentum; transaction costs; Market anomalies

摘要

Our paper re-examines the profitability of relative strength or momentum trading strategies (buying past strong performers and selling past weak performers). We find that standard relative strength strategies require frequent trading in disproportionately high cost securities such that trading costs prevent profitable strategy execution. In the cross-section, we find that those stocks that generate large momentum returns are precisely those stocks with high trading costs. We conclude that the magnitude of the abnormal returns associated with these trading strategies creates an illusion of profit opportunity when, in fact, none exists. (C) 2003 Elsevier B.V. All rights reserved.