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Earnings and price momentum

journal contribution
posted on 2006-06-01, 00:00 authored by Tarun ChordiaTarun Chordia, L Shivakumar
This paper examines whether earnings momentum and price momentum are related. Both in time-series as well as in cross-sectional asset pricing tests, we find that price momentum is captured by the systematic component of earnings momentum. The predictive power of past returns is subsumed by a zero-investment portfolio that is long on stocks with high earnings surprises and short on stocks with low earnings surprises. Further, returns to the earnings-based zero-investment portfolio are significantly related to future macroeconomic activities, including growth in GDP, industrial production, consumption, labor income, inflation, and T-bill returns.

History

Journal

Journal of financial economics

Volume

80

Issue

3

Pagination

627 - 656

Publisher

Elsevier

Location

Amsterdam, The Netherlands

ISSN

0304-405X

Language

eng

Publication classification

C1.1 Refereed article in a scholarly journal

Copyright notice

2005, Elsevier B.V.

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