Are momentum profits robust to trading costs?

• 成果类型: Article
• 署名作者: Korajczyk, RA; Sadka, R
• 署名单位: Northwestern University; University of Washington; University of Washington Seattle
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/j.1540-6261.2004.00656.x
• 发表日期: 2004
• 页码: 1039-1082
• 关键词: transaction costs; RISK; stocks; returns; MARKET; price; profitability; performance; INFORMATION; size

摘要

We test whether momentum strategies remain profitable after considering market frictions induced by trading. Intraday data are used to estimate alternative measures of proportional and non-proportional (price impact) trading costs. The price impact models imply that abnormal returns to portfolio strategies decline with portfolio size. We calculate break-even fund sizes that lead to zero abnormal returns. In addition to equal- and value-weighted momentum strategies, we derive a liquidity-weighted strategy designed to reduce the cost of trades. Equal-weighted strategies perform the best before trading costs and the worst after trading costs. Liquidity-weighted and hybrid liquidity/value-weighted strategies have the largest break-even fund sizes: $5 billion or more (relative to December 1999 market capitalization) may be invested in these momentum strategies before the apparent profit opportunities vanish.