Investment-based momentum profits
By: Laura Xiaolei Liu, Lu Zhang
Contributors: Zhang, Lu; National Bureau of Economic Research
Series: NBER working paper series -- working paper 16747; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 16747.
Publisher: National Bureau of Economic Research
Published: 2011
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "Momentum is consistent with value maximization of firms.  The neoclassical theory of investment implies that expected stock returns are connected with expected marginal benefits of investment divided by marginal costs of investment.  Winners have higher expected growth and expected marginal productivity (two major components of marginal benefits of investment), and consequently earn higher expected stock returns than losers.  The investment-based model succeeds in capturing average momentum profits, reversal of momentum in long horizons, and the interaction of momentum with firm characteristics.  However, the model fails to reproduce procyclical momentum profits.  Overall, our evidence suggests that momentum can be understood within a framework in which markets are efficient and managers maximize the market value of equity"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 5/5/2011.

Includes bibliographical references.

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