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Can the cross-sectional variation in expected stock returns explain momentum?

Bulkley, G and Nawosah, V (2009) 'Can the cross-sectional variation in expected stock returns explain momentum?' Journal of Financial and Quantitative Analysis, 44 (4). 777 - 794. ISSN 0022-1090

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Abstract

It has been hypothesized that momentum might be rationally explained as a consequence of the cross-sectional variation of unconditional expected returns. Stocks with relatively high unconditional expected returns will on average outperform in both the portfolio formation period and in the subsequent holding period. We evaluate this explanation by first removing unconditional expected returns for each stock from raw returns and then testing for momentum in the resulting series. We measure the unconditional expected return on each stock as its mean return in the whole sample period. We find momentum effects vanish in demeaned returns. © 2009 Michael G. Foster School of Business.

Item Type: Article
Subjects: H Social Sciences > HG Finance
Divisions: Faculty of Social Sciences > Essex Business School
Faculty of Social Sciences > Essex Business School > Essex Finance Centre
Depositing User: Jim Jamieson
Date Deposited: 18 Dec 2012 15:21
Last Modified: 23 Jan 2019 05:15
URI: http://repository.essex.ac.uk/id/eprint/4790

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