Enhancing the Profitability of Earnings Momentum Strategies: The Role of Price Momentum, Information Diffusion and Earnings Uncertainty

Czaja MG, Kaufmann P, Scholz H (2013)


Publication Language: English

Publication Type: Journal article

Publication year: 2013

Journal

Publisher: risk.net

Book Volume: 2

Pages Range: 3-57

Journal Issue: 4

DOI: 10.21314/JOIS.2013.028

Abstract

Recent  literature  indicates  that  stock  characteristics  proxying  for  behavioral
biases reinforce the earnings momentum effect. Using data from the investable
German HDAX index, we analyze whether returns of earnings momentum strate-
gies can be enhanced in a way that not only survives common risk adjustments but
also maintains profitability after trading costs. For our liquid stock universe, we
find that the rate of information diffusion has the strongest impact. A bivariate sort
on earnings momentum and market capitalization yields gross Carhart alphas of
up to 22% per year. The abnormal returns are largely robust to reasonable levels
of trading costs.

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How to cite

APA:

Czaja, M.-G., Kaufmann, P., & Scholz, H. (2013). Enhancing the Profitability of Earnings Momentum Strategies: The Role of Price Momentum, Information Diffusion and Earnings Uncertainty. Journal of Investment Strategies, 2(4), 3-57. https://dx.doi.org/10.21314/JOIS.2013.028

MLA:

Czaja, Marc-Gregor, Philipp Kaufmann, and Hendrik Scholz. "Enhancing the Profitability of Earnings Momentum Strategies: The Role of Price Momentum, Information Diffusion and Earnings Uncertainty." Journal of Investment Strategies 2.4 (2013): 3-57.

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