Reversal and momentum patterns in weekly stock returns: European evidence

Hühn HL, Scholz H (2019)


Publication Language: English

Publication Type: Journal article

Publication year: 2019

Journal

Book Volume: 37

Pages Range: 272-296

Journal Issue: 2

DOI: 10.1002/rfe.1037

Abstract

We analyze short-term reversal and medium-term momentum patterns in weekly stock returns in Europe. Focusing on raw and on stock-specific returns, our empirical results show for both return specifications i) a negative relation between weekly past returns and future returns in the short run and ii) a positive relation in the medium run. However, returns of reversal and momentum strategies based on stock-specific returns are less volatile. In further analyses, we find short-term reversal and medium-term momentum patterns to be connected to stock characteristics. Looking at the potential causes of these effects, our results do not corroborate that short-term reversal in weekly stock returns is due to an over- or underreaction to firm-specific news nor mainly driven by illiquidity. On the other hand, medium-term momentum in weekly stock returns can be connected to behavioral biases. Finally, our concluding tests confirm that our findings are robust among industries, in sub-periods, for the January effect and in varying market states.

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How to cite

APA:

Hühn, H.L., & Scholz, H. (2019). Reversal and momentum patterns in weekly stock returns: European evidence. Review of Financial Economics, 37(2), 272-296. https://dx.doi.org/10.1002/rfe.1037

MLA:

Hühn, Hannah Lea, and Hendrik Scholz. "Reversal and momentum patterns in weekly stock returns: European evidence." Review of Financial Economics 37.2 (2019): 272-296.

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