The idiosyncratic momentum anomaly

David Blitz, Matthias X. Hanauer*, Milan Vidojevic

*Corresponding author for this work

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

This paper seeks to uncover the drivers of the idiosyncratic momentum anomaly. We show that: (i) idiosyncratic momentum is a distinct phenomenon that exists next to conventional momentum and is not explained by it; (ii) idiosyncratic momentum is priced in the cross-section of stock returns after controlling for established and recently proposed asset pricing factors, including the ones that explain a host of momentum-related anomalies; (iii) some of the prominent explanations for the momentum premium, such as crash risk, and investor overconfidence and overreaction linked to market states and dynamics cannot explain idiosyncratic momentum profits; (iv) long-term return dynamics of idiosyncratic momentum support the underreaction hypothesis for its existence; (v) idiosyncratic momentum generates robust returns across a range of developed and emerging markets.

Original languageEnglish
Pages (from-to)932-957
Number of pages26
JournalInternational Review of Economics and Finance
Volume69
DOIs
Publication statusPublished - Sep 2020

Keywords

  • Asset pricing
  • Idiosyncratic momentum
  • Momentum crashes
  • Risk management

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