Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
7360630 | Journal of Empirical Finance | 2018 | 45 Pages |
Abstract
We demonstrate that the residual momentum strategy, which is constructed to hedge out the risk exposure to the Fama-French (1993) factors, is profitable in Japan for short-term holding periods ranging from three to 12 months. Residual momentum profits over long-term holding periods ranging from two to five years do not reverse, unlike traditional price momentum strategies observed in the U.S. market. The findings in both short- and long-term holding periods are attributed to investor underreaction. A comprehensive index of limited attention supports investor underreaction as an underlying cause of momentum in Japan.
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Authors
Rosita P. Chang, Kuan-Cheng Ko, Shinji Nakano, S. Ghon Rhee,