Sources of Momentum Profits in International Stock Markets

Kyung-In Park*
Dongcheol Kim**
This Draft: August 2011

Abstract:

This paper examines the sources of momentum profits of countries exhibiting and nonexhibiting momentum and compares the differences in the underlying factors determining
momentum profits between these two group countries. We use monthly stock returns of
fourteen major countries. We find remarkable differences in the decomposed components
between these two group countries. Countries exhibiting momentum show that the crosssectional dispersion in unconditional mean returns dominates the negative contribution by the
part reflecting the intertemporal behavior of asset returns. However, this is not the case in
countries exhibiting no momentum. Furthermore, countries with greater relative contribution
from the cross-sectional variance in unconditional mean returns tend to have greater momentum
profits. These results are robust in subperiods. Our empirical results indicate that intermediateterm return-based strategies can be profitable when the cross-sectional dispersion in
unconditional mean returns is larger than the part reflecting the intertemporal behavior of asset
returns. Therefore, our results might support the risk-based explanations for the momentum
phenomenon rather than the behavioral finance-based explanations.
JEL Classification: G12, G14
Key words: Price momentum; Decomposition of momentum profits; Cross-sectional dispersion
in expected returns; Intertemporal stock returns

.
Korea University Business School. E-mail: inpark09@korea.ac.kr.
**
Corresponding author. Korea University Business School. Anam-dong, Seongbuk-gu, Seoul
136-701, Korea. Phone: +82-2-3290-2606, Fax:+82-2-922-7220. E-mail: kimdc@korea.ac.kr
*

Sources of Momentum Profits in International Stock Markets

Abstract
This paper examines the sources of momentum profits of countries exhibiting and nonexhibiting momentum and compares the differences in the underlying factors
determining momentum profits between these two group countries. We use monthly
stock returns of fourteen major countries. We find remarkable differences in the
decomposed components between these two group countries. Countries exhibiting
momentum show that the cross-sectional dispersion in unconditional mean returns
dominates the negative contribution by the part reflecting the intertemporal behavior of
asset returns. However, this is not the case in countries exhibiting no momentum.
Furthermore, countries with greater relative contribution from the cross-sectional
variance in unconditional mean returns tend to have greater momentum profits. These
results are robust in subperiods. Our empirical results indicate that intermediate-term
return-based strategies can be profitable when the cross-sectional dispersion in
unconditional mean returns is larger than the part reflecting the intertemporal behavior
of asset returns. Therefore, our results might support the risk-based explanations for the
momentum phenomenon rather than the behavioral finance-based explanations.

JEL Classification: G12, G14

Key words: Price momentum, Decomposition of momentum profits, Cross-sectional
dispersion in expected returns, Intertemporal stock returns

I. Introduce

If stock markets are efficient, investment strategies based on past information of stock
prices should not produce abnormal returns. However, many papers have recently
documented that such strategies generate abnormal returns. Jegadeesh and Titman (1993)
document that firms with higher past returns persistently outperform firms with lower
past returns over the midterm period (three to twelve months). That is, past winners
continue to be winners, and past losers continue to be losers. This violates market
efficiency, since investors can earn persistently abnormal returns with zero investment
by selling short past losers and buying long past winners.
This momentum phenomenon has been found across countries and over time.
Rouwenhorst (1998) and Griffin, Ji and Martin (2003) report that this momentum
phenomenon is also found in many countries outside the U.S. Jegadeesh and Titman
(2001) confirm their original results using the subsequent period covered in their
original work and argue that their original results were not a product of data snooping
bias. 1 Moskowitz and Grinblatt (1999) and Lewellen (2002) report that momentum
strategies using equity portfolios generate even stronger profits. The most notable
recent attempt to explain momentum profits using the explicit risk factor models is
Fama and French (1996). They report that their three-factor model succeeds in
explaining many strong patterns in returns that Sharpe (1964) and Linters (1965)
CAPM failed to explain the momentum phenomenon.

Chan, Jegadeesh, and Lakonishok (1996) also confirm the profitability of price momentum strategies
over the 1977 to 1993 period.
2

Ji and Martin (2003) examine most intensively the phenomenon of momentum

in international stock markets by using 40 countries across four continents. 2 They report
that such momentum phenomenon is not found in all countries. Most sample countries
of Europe, North America, and Africa exhibit the momentum phenomenon, while most
Asian sample countries exhibit no such momentum phenomenon. It would be
interesting, therefore, to examine which underlying force(s) (or component) leads some
countries to exhibit and not to exhibit the momentum phenomenon.
The purpose of this paper is to examine the differences in the underlying forces
determining momentum profits between countries exhibiting and non-exhibiting the
momentum phenomenon and to induce which component(s) drives momentum profits.
In order to determine the underlying forces of momentum profits, we use the
decomposition method of momentum profits by Lo and MacKinlay (1990). They
decompose momentum profits into three components; (1) the first-order serial
covariance of market returns, (2) the average of first-order serial covariances of all
individual assets, and (3) the cross-sectional dispersion in unconditional mean returns of
individual assets. The total momentum profit equals minus (1) plus (2) plus (3) [i.e.,
1

3 . That is, the first term contributes negatively, and the second and

third terms contribute positively to momentum profits. The first two components reflect
the intertemporal behavior [

sectional behavior of asset returns [

2 ], and the third component reflects the cross3 ].

As representative countries, we select 14 major countries; Australia, Canada, France,

Germany, Italy, Netherland, Sweden, Switzerland, U.K., and U.S. as a group of

They use Jegadeesh and Titmans (1993) momentum strategy six-month assessment period and sixmonth holding period.
3

countries exhibiting momentum and Hong Kong, Japan, Korea, and Taiwan as a group
of countries non-exhibiting momentum. Over the whole sample period from January
1990 to December 2010, we compute the value of each of the decomposed components
of these two group countries and compare the computed values between these two
groups. Most sample countries show a negative value for the part reflecting the
intertemporal behavior [i.e.,

2 ]. Of course, the component reflecting the

cross-sectional behavior of asset returns [i.e., (3)] is all positive. We find remarkable
differences in the value of the components between these two group countries. The
countries exhibiting momentum show that the cross-sectional dispersion in
unconditional mean returns (positive value) dominates the part reflecting the
intertemporal behavior of asset returns (negative value). Meanwhile, the countries nonexhibiting momentum show that the positive contribution to momentum profits by the
cross-sectional dispersion in unconditional mean returns is a little greater than the
negative contribution by the part reflecting the intertemporal behavior. As a result, the
combined contribution is a small amount of momentum profits in this group.
Furthermore, we find that the magnitude of momentum profits is proportional to the
relative contribution of the cross-sectional variance in unconditional mean returns. In
other words, countries with greater relative contribution from the cross-sectional
variance in unconditional mean returns tend to have greater momentum profits. These
results are robust over the two sub-periods; 1990 to 1999 and 2000 to 2010.
Our empirical results indicate that intermediate-term return-based strategies can
be profitable when the cross-sectional dispersion in unconditional mean returns
dominates the part reflecting the intertemporal behavior of asset returns. This suggests
that higher (lower) returns of past winners (losers) in the holding period result from
4

their higher (lower) unconditional expected returns rather than from the delayed
response in price or other intertemporal regularities caused by investors irrationality.
These results support the risk-based explanations (Conrad and Kaul, 1998; Berk, Green,
and Naik, 1999; Chordia and Shivakumar, 2002) for the momentum phenomenon rather
than the behavioral-based explanations (Daniel, Hirshleifer, and Subrahmanyam, 1998;
Barberis, Shleifer, and Vishny, 1998; Hong and Stein, 1999; Hong, Lim, and Stein,
2000), since the cross-sectional difference in unconditional expected returns is
determined by the degree of riskiness of each firm. 3
The rest of this paper is organized as follows: Section II describes data, Section
III presents empirical results, and Section IV concludes.

II. Data

According to Griffin, Ji and Martin (2003), most European and several American
countries show a strong momentum phenomenon, while Asian countries show no such
phenomenon. Therefore, we select ten representative countries (Australia, Canada,
France, Germany, Italy, Netherland, Sweden, Switzerland, U.K. and U.S.) from the
group showing momentum phenomenon and four representative countries (Hong Kong,
Japan, Korea, and Taiwan) from the group showing no momentum phenomenon. One of
the criteria for the country to be chosen is that it should have enough number of firms.
Firms whose monthly return data more than three years are available in Datastream are
included in the sample. The sample period is from January 1990 to December 2010. If a
country has multiple stock exchanges, we use the representative stock exchange. Table

Grundy and Martin (2001) also argue that the cross-sectional difference in expected returns is not the
primary cause of the momentum phenomenon.
5

1 shows the number of firms of each country in each year from 1990 through 2010. The
sample countries have enough number of stocks in every year to form momentum
portfolios. Table 2 presents average monthly returns (in Panel A) and standard
deviations (in Panel B) of each country in each year.

III. Empirical Results

A. Momentum Profits by Each Country
Momentum portfolios are formed exactly in the same way as in Jegadeesh and Titman
(1993). That is, every month all sample firms in each country are sorted into one of ten
decile portfolios based on past J-month (assessing period) returns, and held for K
(holding period) months. Thus, portfolios have overlapping holding periods. All
portfolios are equally weighted. In fact, Jegadeesh and Titman consider four different
assessing periods (J = 3, 6, 9, and 2 months) and four different holding periods (K = 3,
6, 9, and 12 months). Thus, they consider 16 different momentum strategies. Since the
6-month/6-month strategy among these strategies tends to be regarded as the
representative relative strength strategy in the literature, we construct momentum
portfolios by setting J=6 months and K = 3, 6, 9, or 12 months in our analysis. We also
repeat our analysis using the other sets of momentum portfolios, but the results are
qualitatively similar. 4
Table 3 reports the average returns on the momentum portfolios by setting J/K
= 6-month/6-month strategy in each country over the period from January 1990 through
December 2010. 5 P1 (loser) is the portfolio with lowest past performance, while P10

The results are available upon request.

The first assessment period is from July 1989 through December 1989, and the first holding period is
from January 1990 through June 1990.

(winner) is the portfolio with largest past performance. P10-P1 indicates WML
(winner minus loser), which is the return on the zero-investment portfolio by selling
short the loser portfolio (P1) and buying long the winner portfolio (P10). Consistently
with Griffin, Ji and Martin (2003), Australia, Canada, France, Germany, Italy,
Netherland, Sweden, Switzerland, U.K., and U.S. show significant momentum profits.
That is, momentum profits (per month) of these ten countries are 0.47 percent for
Australia (t-statistic of 2.53), 0.77 percent for Canada (t-statistic of 3.88), 1.31 percent
for France (t-statistic of 6.60), 0.98 percent for Germany (t-statistic of 5.04), 1.06
percent for Italy (t-statistic of 5.96), 1.57 percent for Netherland (t-statistic of 7.29),
0.87 percent for Sweden (t-statistic of 3.30), 1.47 percent for Switzerland (t-statistic of
7.63), 1.25 percent for U.K. (t-statistic of 6.22), and 0.62 percent for U.S. (t-statistic of
2.96). Among these, many countries show momentum profits more than one percent
per month. Meanwhile, the Asian countries show insignificant momentum profits (even
negative) or a small amount of momentum profits if any. That is, momentum profits of
Hong Kong, Japan, Korea, and Taiwan are 0.27 percent (t-statistic of 1.32), -0.20
percent (t-statistic of -1.10), -0.40 percent (t-statistic of -1.63), and 0.09 percent (tstatistic of 0.40), respectively. Among these four Asian countries, Hong Kong shows
largest momentum profit. However, its magnitude is much smaller than that of the
European and North American countries and moreover it is statistically insignificant.
We hereafter term momentum profits made in the same way as in Jegadeesh and
Titman (1993) JT momentum profits.
In order to confirm the above results with different holding periods, we also
examine momentum profits with holding periods of K = 3, 9, and 12 months. Table 4
presents the momentum profits for these holding periods. With these different holding
7

periods, momentum profits of the ten European and North American countries are still
strongly statistically significant, except for a few cases. Among these ten countries,
Switzerland shows the strongest momentum phenomenon. Hong Kong shows
significant momentum profits only for K = 3 months holding period but insignificant
momentum profits for the other holding periods (even negatively significant momentum
profit for K=12 months holding period). Japan and Taiwan do not have any momentum
profits over the all holding periods. Korea also shows no momentum profits. One
interesting feature from Korea is that it shows even strong contrarian profits with K = 9
and 12 months holding periods, which is the reverse of momentum profits or a reversal
effect. Momentum profits with K = 9 and 12 months in Korea are -0.84 percent (with tstatistic of -4.46) and -0.80 percent (with t-statistic of -4.93), respectively. Therefore, we
classify the ten European and North American countries (Australia, Canada, France,
Germany, Italy, Netherland, Sweden, Switzerland, U.K., and U.S.) as momentum
countries and the four Asian countries (Hong Kong, Japan, Korea, and Taiwan) as nonmomentum countries. The average momentum profits of the ten momentum countries
are 1.25 percent, 1.00 percent, 0.83 percent, and 0.54 percent for K = 3, 6, 9, and 12
months, respectively, and these are all strongly statistically significant. Meanwhile,
those of the four non-momentum countries are -0.07 percent, -0.06 percent, -0.34
percent, and -0.39 percent, respectively, and these are all statistically insignificant.

B. The Decomposition of Momentum Profits

The previous results that momentum is not a universe phenomenon and its magnitude is
different across countries suggest that there might be different patterns in time-series
and cross-sectional behavior of stock returns of each country. In this section, therefore,
8

by decomposing momentum profits into several components, we examine which

components of stock price behavior do and do not cause momentum profits.
Lehmann (1990) and Lo and MacKinlay (1990) suggest an elegant way in
decomposing momentum profits (or contrarian profits) into several components. We
follow their approaches. The investment weight received by a security i in the
momentum strategy at a given month t is given by
1

where

and j is the length of

is the equal-weighted market return at time

1,

1, , the assessing period. 6 The weight given to each security

in the momentum strategy depends on the previous periods performance relative to the
market return. At time t (the beginning of portfolio formation period), that is, losers
whose past returns are less than the market return are sold short and winners whose past
returns are greater than the market return are bought long. The sum of the weights
equals zero, which is a zero-investment portfolio. That is,
0.

, from this strategy is given by

Then, the momentum profit,

j

By taking expectation in equation (3), the expected momentum profits with assessing
period of j is

Investment weights for contrarian strategies are determined by

9

4
,

where
of the market returns,

is the first-order (or j-month lagged) serial covariance

1

is the average of the first1

order serial covariances of the N individual stocks, and

is the cross-sectional variance of unconditional mean returns of individual

stocks. 7 We let
.
Then,

(5)

indicates the contribution to the expected momentum profits from time-

series predictability of asset returns. Conrad and Kaul (1998) term this the
predictability-profitability index. The third term,

, indicates the contribution to

the expected momentum profits from cross-sectional dispersion in mean returns of

assets, under the assumption of stationarity of mean returns. Even though asset prices
0 , the expected momentum profits can

follow a random walk (i.e.,

still exist due to cross-sectional dispersion in unconditional mean returns. We hereafter

term momentum profits of equation (3) or (4) LM momentum profits in order to
differentiate from JT momentum profits made in the same way as in Jegadeesh and
Titman (1993).

C. Empirical Results of the Decomposition of Momentum Profits

In fact, the first-order serial covariance of the market returns,

,
-lagged and one-lead own- and cross-covariances of N individual stocks.
10

, is the average of all one

Table 5 shows LM momentum profits based on the trading strategies selling short
stocks with returns lower than the market returns and buying long stocks with returns
greater than the market returns as in equation (1). We set the length of one period
1,

as 6 months. These momentum profits are the time series average of profits

made at month t,

j , t = January 1990 through December 2010. LM momentum

profits of the ten momentum countries are 0.17 percent (0.44 percent) for Australia,
0.40 percent (0.74 percent) for Canada, 1.07 percent (2.77 percent) for France, 1.20
percent (2.89 percent) for Germany, 1.17 percent (3.58 percent) for Italy, 1.04 percent
(4.21 percent) for Netherland, 0.48 percent (1.24 percent) for Sweden, 1.33 percent
(3.43 percent) for Switzerland, 1.16 percent (2.80 percent) for U.K., and 0.48 percent
(1.65 percent) for U.S. They are all statistically significant except for Australia, Canada,
and Sweden. However, LM momentum profits of these three countries are much greater
than those of the non-momentum countries. LM momentum profits of the four nonmomentum countries (Hong Kong, Japan, Korea, and Taiwan) are all negative; they are
-0.30 percent (-0.65 percent), -0.97 percent (-2.20 percent), -0.70 percent (-1.15 percent),
and -0.10 percent (-0.22 percent), respectively. They are all statistically insignificant.
The magnitude of LM momentum profits is slightly different from that of JT
momentum profits. However, the ranking and the sign of both momentum profits are
almost identical, and they are highly correlated. The correlation coefficient between the
LM and JT momentum profits is 0.835. The average value of LM momentum profits of
the ten momentum countries is 0.85 percent (with t-statistic of 6.43), while that of the
four non-momentum countries is -0.52 percent (with t-statistic of -2.64).
To examine which component(s) makes the difference in momentum profits
between the momentum countries and the non-momentum countries, we compute the
11

value of each component in equation (4). Table 6 presents the time-series averages of
each of the three components and the expected momentum profits over the whole
sample period which are the sum of the three components. 8 The results show that
among the three components, the component of the cross-sectional dispersion in mean
asset returns,

, is greater in the momentum countries than the other components

reflecting the intertemporal behavior of asset returns. The average values of

in

these two groups are 2.616 and 1.278, respectively. However, the components reflecting
the intertemporal behavior of asset returns,
momentum countries than

. Note that

and

, are greater in the nonis the time series

average of cross-sectional variances in unconditional mean stock returns,

is the time series average of the first-order serial covariances of the

market returns, and

is the time series average of the averages of

all first-order serial covariances of N individual stocks. All four non-momentum sample
countries have negative values of

, which indicates that these countries exhibit a

short-term reversal in stock return, while the momentum countries tend to have positive
values of

.9

To investigate whether the difference in those three components between the

two groups persists during subperiods, we divide the whole sample period into two
subperiods; January 1990 to December 1999 and January 2000 to December 2010.
However, we also find the similar results. Table 7 reports the results of the subperiods.
8

We first calculate the value of each of the three components and add up these values to the expected
profits at month t and then compute time series averages of the values of each component.
9
It could be argued that the negative serial correlation of the non-momentum countries is caused by price
limit. Korea has a price limit of 15% per day, and Japan has a price limit of 20% to 30% per day for
individual stocks. However, countries with no price limit such as Hong Kong, Canada, and U.S. also
exhibit a negative serial correlation. Therefore, it is difficult to say that the price limit could cause a
negative serial correlation.
12

To examine the difference in the decomposed component of momentum profits

between the momentum and non-momentum countries in more detail, we compute the
relative importance of each component. Table 8 apparently shows that the component
reflecting the cross-sectional behavior of asset returns have greater impact on
momentum profits relatively to the intertemporal behavior of asset returns in the
momentum countries rather than in the non-momentum countries. Specifically, the
average of the ratios of

to the absolute value of

for the

ten momentum countries is 13.023, while that for the four non-momentum countries is
only 1.266. Note that

is the time series average of the predictability-profitability

index values reflecting the intertemporal behavior of asset returns. Also, the impact
from the intertemporal behavior of asset returns on momentum profits is much smaller
in the momentum countries than in the non-momentum countries. That is, the ratios of
the absolute value of

to

(the expected momentum profits) for the ten

momentum countries are 0.604 for Australia, 0.563 for Canada, 0.015 for France, 0.034
for Germany, 0.139 for Italy, 0.120 for Netherland, 0.250 for Sweden, 0.372 for
Switzerland, 0.650 for U.K., and 0.251 for U.S., while these ratios for the four nonmomentum countries are 2.437 for Hong Kong, 5.072 for Japan, 3.490 for Korea, and
0.878 for Taiwan. The averages the ratios of the absolute value of

to

for the momentum countries and the non-momentum countries are 0.300 and 2.969,
respectively.
Table 8 also shows the relative importance of these two components to the
expected momentum profits. The ratios of

to |

for four selected

countries among the momentum countries such as Canada, Germany, U.K., and U.S. are
-0.265, -0.032, -0.283, and -0.167, respectively, and these countries ratios of
13

to

are 0.735, 0.968, 0.717, and 0.833, respectively. Note that the sum of the

ratios in absolute term for each country equals one. These results indicate that the
component of the cross-sectional behavior of asset returns,

, makes most of the

contribution to momentum profits in these momentum countries, but the component of

the intertemporal behavior of asset returns,

, makes only a small negative

contribution to momentum profits. We find the similar results for the other momentum
countries. In the non-momentum countries, however, the component of the
intertemporal behavior of asset returns makes a big negative contribution to momentum
profits, and the component of the cross-sectional behavior of asset returns makes
to |

relatively a small positive contribution. Specifically, the ratios of

for Hong Kong, Japan, Korea, and Taiwan are -0.415, -0.555, -0.584, and -0.319,
to |

respectively, and these countries ratios of

are 0.585, 0.445,

0.416, and 0.681, respectively. To examine if the magnitude of momentum profits is

proportionally related to the component of the cross-sectional variance in expected
returns,

we

regress

JT

momentum

profits

(with

months)

on

1,

, 14.

for all 14 countries. That is, we estimate

Momentum profit
The slope coefficient estimate,

, is 2.57, with -statistic of 3.71. The correlation

coefficient between these two variables is 0.731. These results indicate that countries
with greater contribution from the cross-sectional variance in expected return tend to
have greater momentum profits.
Figure 1 depicts the above-mentioned relative importance of the two
components of each country in the whole sample period. The top part of a bar graph
14

indicates the relative portion contributed by the cross-sectional behavior of asset returns,
|

, and its bottom part indicates the relative portion contributed by

the intertemporal behavior of asset returns to momentum profits,

Table 9 is analogous to Table 8 except that this table reports the results for the
two subperiods; January 1990 to December 1999 and January 2000 to December 2010.
The results for the subperiods are similar to those for the whole sample period. One
noteworthy thing is that the relative contribution of the cross-sectional variance in
expected return,

, is slightly decreased over the two subperiods

in the momentum countries, while it is slightly increased in the non-momentum

countries.

IV. Conclusions

This paper examines the sources of momentum profits of countries exhibiting and nonexhibiting momentum by decomposing momentum profits and compares the difference
in the underlying factors determining momentum profits between these two group
countries. Momentum profits can be decomposed into two parts; the part reflecting the
cross-sectional difference in unconditional expected returns and the part reflecting the
intertemporal behavior of asset returns. we select 14 major countries; Australia, Canada,
France, Germany, Italy, Netherland, Sweden, Switzerland, U.K., and U.S. as a group of
countries exhibiting the momentum phenomenon and Hong Kong, Japan, Korea, and
Taiwan as a group of countries non-exhibiting the momentum phenomenon.
Most sample countries show a negative value for the part reflecting the
intertemporal behavior of asset returns. We find a remarkable difference between these
two group countries in the value of the component reflecting the cross-sectional
15

behavior of asset expected returns. This component has a greater impact on momentum
profits relatively to the component of the intertemporal behavior of asset returns in the
momentum countries. However, this is not the case in the non-momentum countries.
That is, the positive contribution by the component reflecting the cross-sectional
behavior of asset expected returns is a little greater than the negative contribution by the
component reflecting the intertemporal behavior of asset returns. As a result, the
combined contribution to momentum profits is small in the non-momentum countries.
Furthermore, we find that the magnitude of momentum profits is proportional to the
relative contribution of the cross-sectional variance in unconditional mean returns. In
other words, countries with greater relative contribution from the cross-sectional
variance in unconditional mean returns tend to have greater momentum profits.
Our empirical results indicate that intermediate-term return-based strategies are
profitable when the cross-sectional dispersion in unconditional mean returns dominates
the part reflecting the intertemporal behavior of asset returns. This suggests that higher
(lower) returns of past winners (losers) in the holding period result from their higher
(lower) unconditional expected returns rather than from the delayed response in price or
other intertemporal regularities caused by investors irrational behavior. Our results
support the risk-based explanations for the momentum phenomenon rather than the
behavioral-based explanations, since the cross-sectional difference in unconditional
expected returns is determined by the degree of riskiness. Therefore, the reason that the
current existing asset pricing models fail to explain the momentum phenomenon is that
misspecified asset pricing models are used in measuring abnormal returns.

16

References

Barberis, Nicholas, Andrei Shleifer, and Robert Vishny, 1998, A model of investor
sentiment, Journal of Financial Economics 49, pp. 307-343.
Chae, Joon and Yunsung Eom, 2009, Momentum profit and its sources, Asia-Pacific
Journal of Financial Studies, pp .211-236.
Chordia, Tarun and Lakshmanan Shivakumar, 2002, Momentum, business cycle, and
time-varying expected returns, Journal of Finance 57, pp. 985-1019.
Conrad, Jennifer, and Gautam Kaul, 1998, An anatomy of trading strategies, Review of
Financial Studies 11, pp. 489-519.
Daniel, Kent, David Hirshleifer, and Avanidhar Subrahmanyam, 1998, Investor
psychology and security market under-and overreactions, Journal of Finance 53,
pp.1839-1885.
DeBondt, Werner F.M., and Richard H. Thaler, 1985, Dose the stock market overreact?
Journal of Finance 40, pp.793-805.
Fama, Eugene, and Kenneth French, 1996, Multifactor explanations of asset pricing
anomalies. Journal of Finance 51, 55-84.
Griffin, John M., Xiuqing Ji, and J. Spencer Martin, 2003. Momentum investing and
business cycle risk: evidence from pole to pole. Journal of Finance 58, 2515-2547.
Grundy, Bruce D., and J. Spencer Martin, 2001. Understanding the nature and the risks
and the sources of the rewards to momentum investing. Review of Financial
Studies 14, 29-78.
Hong, Harrison, and Jeremy C. Stein, 1999, A unified theory of under-reaction,
momentum trading, and overreaction in asset markets, Journal of Finance 54,

17

pp.2143-2184.
Jegadeesh, Narasimhan, and Sheridan Titman, 1993, Returns to buying winners and
selling losers: Implications for stock market efficiency, Journal of Finance 48,
pp.65-91.
Jegadeesh, N., and S. Titman, 2001, Profitability of Momentum Strategies: An
Evaluation of Alternative Explanations," Journal of Finance 56, 699-719.
Lo, Andrew W., and A. Craig MacKinlay, 1990, When are contrarian profits due to
stock market overreaction?, Review of Financial Studies 3, pp. 175-205.
Rouwenhorst, K. Geert., 1998, International momentum strategies, Journal of Finance
53, pp. 267-284.

18

Table 1 Number of Stocks of Each Sample Country

This table presents the number of common stocks of each sample country used in computing monthly returns each year. Common stocks that have
return observations more than three years are included in the sample. The return data are obtained from Datastream. The sample period is from
January of 1990 to December of 2010.

Year

Australia

Canada

France

Germany

1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010

362
397
427
491
589
621
919
965
974
1000
1112
1137
1152
1191
1313
1419
1558
1720
1707
1658
1601

326
337
341
373
410
430
471
526
559
606
638
642
678
717
788
868
954
1022
1059
1053
1059

138
145
155
165
213
235
321
400
483
558
660
687
662
652
634
633
697
737
688
677
617

300
318
303
321
326
348
370
393
457
611
747
777
751
744
738
778
900
1042
1059
1018
971

Hong
Kong
243
284
342
397
443
460
487
554
583
611
682
733
800
843
863
885
933
1019
1037
1034
1028

Italy

Japan

Korea

185
189
194
196
201
207
205
209
219
246
273
281
277
262
257
262
274
294
287
270
261

1692
1759
1783
1828
1911
1990
2049
2105
2134
2177
2246
2273
2260
2275
2342
2362
2407
2413
2377
2303
2240

520
530
539
550
576
601
648
680
681
700
701
689
687
680
674
668
685
701
716
698
680

19

Netherland
144
146
149
150
158
162
168
185
201
211
203
180
165
160
153
144
143
140
126
120
112

Sweden
101
111
119
132
158
172
198
244
290
331
367
361
347
335
343
368
406
465
466
444
424

Switzerland
182
181
188
203
195
212
218
217
236
244
262
263
262
258
253
253
255
257
257
252
243

Taiwan

U.K.

U.S.

175
201
227
254
275
309
371
414
464
538
598
632
676
706
721
720
730
732
731
735
726

939
970
977
1000
1033
1082
1185
1262
1280
1294
1399
1394
1409
1371
1508
1688
1797
1778
1641
1471
1332

796
824
872
948
1028
1090
1150
1206
1222
1228
1203
1231
1261
1296
1368
1439
1484
1553
1583
1584
1585

Table 2 Average Monthly Return and Volatility

This table presents the average monthly returns and standard deviations in each year of common stocks that have return observations more than
three years. The return data are obtained from Datastream.
Year
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010

Australia
-3.70
0.46
5.67
12.05
-0.64
2.39
1.94
3.22
1.66
5.03
-4.71
2.36
2.47
3.26
-1.49
1.50
5.56
-2.34
1.62
0.17
7.77

Canada

France

4.26
1.04
7.74
5.50
2.14
3.37
0.84
1.57
0.41
6.28
0.80
6.93
8.31
5.27
3.40
7.08
4.19
1.43
5.24
5.68
7.82

-0.45
-2.15
-2.06
6.16
-1.07
-1.11
1.96
1.34
-0.81
10.43
-3.97
1.01
-4.12
-1.12
3.70
3.20
3.90
-1.47
-4.67
-0.23
2.55

Germany
-0.93
-2.99
-0.87
3.03
1.43
1.04
1.84
-0.46
1.64
7.35
-6.31
-6.05
-7.38
-3.05
0.83
1.11
2.60
0.45
3.83
1.11
4.80

Hong
Kong
-2.97
-0.64
-4.19
11.96
-7.15
-3.47
2.06
-5.37
-6.92
12.50
-1.56
0.20
0.01
0.97
2.39
1.71
0.63
-2.18
15.40
2.63
0.51

NetherSweden
land
Panel A: Average return (%)
2.24
-0.27
2.02
0.94
-0.32
-1.71
-1.61
-7.49
-1.28
-7.84
-2.30
1.44
11.13
1.54
2.28
12.80
4.40
-2.63
5.76
5.05
0.91
3.21
7.14
1.15
0.76
3.64
7.76
-9.29
1.55
0.68
0.50
-8.37
-12.53
0.94
5.31
7.08
-12.57
-26.88
-1.13
2.00
1.61
-5.27
21.11
-1.27
-1.73
9.92
-6.16
-14.78
9.31
21.73
-4.83
-4.17
-8.70
-3.13
-8.42
-0.43
-5.66
0.76
5.66
-2.38
-6.10
-3.45
-14.10
-4.86
-11.53
-2.08
3.09
2.04
-0.06
1.30
4.54
3.74
0.74
4.13
3.22
1.92
9.48
0.62
2.15
7.71
2.47
2.37
-2.28
5.29
7.62
-2.12
-4.61
-0.34
-1.38
-5.29
-2.59
3.06
8.02
-1.16
-8.69
1.84
6.65
6.19
4.86
0.66
6.91
7.32
3.83
6.82
4.40

Italy

Japan

20

Korea

Switzer
-land
0.00
-0.18
2.79
7.75
-0.05
0.43
1.40
1.68
-0.79
6.23
-0.24
1.13
-3.36
0.51
4.22
3.07
5.05
1.41
-2.55
2.18
4.45

Taiwan
0.66
4.99
-9.85
22.12
13.39
8.28
6.38
10.18
-11.39
2.57
-6.22
26.00
-1.79
4.31
7.37
9.65
9.75
-2.93
3.98
12.17
5.80

U.K.
0.15
-3.36
9.14
7.06
-0.55
0.63
0.30
1.45
-0.41
7.56
0.57
0.51
-1.96
1.39
2.20
2.01
3.76
-3.41
-4.43
-0.28
8.37

U.S.
2.91
7.69
2.91
2.99
1.41
2.57
1.24
1.94
2.85
2.37
8.09
5.45
-1.43
5.12
2.98
1.14
0.70
-0.94
6.34
6.60
7.33

Year

1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010

Australia
18.03
16.01
19.51
20.54
12.60
14.41
18.51
17.86
21.75
21.37
17.25
19.71
20.17
18.28
18.23
16.74
19.25
14.72
31.15
18.36
22.93

Canada

France

25.75
28.19
26.66
18.99
17.53
16.87
14.94
17.49
21.04
23.49
21.70
23.53
26.09
17.89
16.23
17.09
17.66
14.16
32.31
16.12
18.12

10.86
17.79
15.94
10.92
11.70
13.44
17.76
15.09
14.88
26.88
17.12
20.15
19.57
16.35
18.86
15.34
15.50
13.32
21.73
18.46
14.94

Germany
6.60
6.38
7.88
8.82
7.10
10.23
10.65
13.13
16.75
23.28
19.23
18.89
20.85
15.65
15.58
13.84
14.78
14.71
27.75
19.54
24.14

Hong
Kong
10.68
7.68
12.34
17.75
10.68
12.36
15.29
14.56
16.13
29.76
16.27
17.83
19.57
20.12
20.54
14.67
16.02
14.98
26.76
16.48
15.37

Netherland
Panel B: Standard deviation (%)
6.38
9.58
6.54
7.25
7.25
7.35
12.71
9.12
8.90
9.01
12.03
10.24
11.39
8.88
13.95
9.43
7.83
6.65
17.33
4.89
8.24
9.24
9.96
8.44
9.27
7.58
13.35
7.59
8.83
15.27
24.96
8.23
8.47
10.55
33.05
8.27
20.43
14.83
22.73
17.12
11.12
10.81
20.75
9.18
6.85
12.13
16.70
16.50
9.82
9.40
13.79
12.21
6.37
9.49
15.70
7.52
8.37
9.75
12.59
9.67
8.26
14.21
17.48
11.33
6.88
8.78
11.51
13.22
8.31
9.70
12.16
11.85
11.80
15.90
17.69
15.38
7.40
10.33
12.09
11.66
14.25
10.67
13.51
12.34

Italy

Japan

21

Korea

Sweden

Switzer
-land

14.37
17.04
19.39
10.97
9.11
9.48
10.04
12.60
14.06
33.79
21.14
15.75
18.83
14.36
16.04
13.89
16.53
14.06
19.09
16.62
15.90

9.84
10.83
13.37
12.64
6.69
9.84
12.91
8.73
6.88
12.79
7.61
9.55
13.91
7.04
6.74
7.54
6.31
7.53
10.13
8.21
7.00

Taiwan

U.K.

U.S.

14.03
6.66
8.41
20.26
11.16
7.28
8.76
10.44
11.18
15.87
16.56
23.28
13.40
9.09
10.83
14.23
16.16
8.28
12.69
13.00
10.39

11.71
10.25
16.16
13.98
8.61
9.62
10.89
12.73
13.03
25.78
13.72
13.80
17.77
13.64
15.56
15.76
15.27
13.60
23.45
14.72
19.37

10.74
13.11
9.55
10.23
8.85
10.12
8.87
9.93
13.15
13.66
16.35
11.78
10.94
11.18
7.41
7.61
7.28
9.51
21.06
10.17
9.27

Table 3 Average Monthly Returns on Portfolios Sorted by Past Six-Month Performance

This table reports the average monthly returns (in percent) for momentum portfolios formed according to past six months returns and held for six
months. At the end of every month, all stocks in each country are sorted into one of ten decile portfolios based on past six month returns. All
portfolios are equally-weighted. P1 (loser) is the portfolio with lowest past performance, while P10 (winner) is the portfolio with largest past
performance. P10-P1 indicates WML (winner minus loser), which is the return on the zero-investment portfolio by selling short the loser
portfolio (P1) and buying long the winner portfolio (P10). t-statistics are reported in parenthesis. The sample period is from January of 1990 to
December of 2010.
Australia

Canada

France

P1(loser)

1.38

2.01

0.23

-0.40

1.09

-0.30

0.14

1.00

P2

0.99

1.21

0.56

0.09

1.22

0.37

0.15

1.56

0.67

1.05

P3

0.81

1.34

0.21

-0.20

1.11

0.17

0.18

1.59

0.36

P4

0.86

1.15

0.31

0.10

1.10

0.30

0.16

1.49

P5

0.99

1.21

0.56

0.09

1.22

0.37

0.15

P6

1.10

1.31

0.54

0.12

1.21

0.32

P7

1.29

1.52

0.73

0.24

1.30

P8

1.59

1.94

0.88

0.45

P9

1.90

2.28

1.15

P10 (winner)

1.85

2.79

P10-P1
(or WML)

0.47
(2.53)

0.77
(3.38)

Germany

Hong
Kong

Italy

Japan

Korea

NetherSweden
land
-0.30
0.78

Switzer
-land
-0.05

Taiwan

U.K.

U.S.

0.67

0.09

1.53

0.58

0.77

0.43

0.97

0.88

0.44

0.76

0.19

0.99

0.47

0.68

0.53

0.81

0.34

0.94

1.56

0.67

1.05

0.58

0.77

0.43

0.93

0.11

1.50

0.69

1.03

0.68

0.79

0.66

0.97

0.60

0.08

1.46

0.77

0.9

0.90

0.73

0.74

1.09

1.32

0.57

0.07

1.45

0.82

1.15

1.01

0.85

0.83

1.11

0.47

1.37

0.55

0.02

1.40

0.94

1.41

1.12

0.67

1.04

1.3

1.55

0.58

1.35

0.81

-0.07

0.62

1.26

1.65

1.42

0.76

1.34

2.15

1.31
(6.60)

0.98
(5.04)

0.27
(1.32)

1.06
(5.96)

-0.20
(-1.10)

-0.40
(-1.63)

1.57
(7.29)

0.87
(3.30)

1.47
(7.63)

0.09
(0.40)

1.25
(6.22)

0.62
(2.96)

22

Table 4 Momentum Profits by Each Country

This table presents momentum profit (in percent) of each country which is the return on the
zero-investment portfolio (WML; winner minus loser) by selling short the loser portfolio and
buying long the winner portfolio. Momentum portfolios are formed according to past six
months returns (J = 6 months) and held for K = 3, 6, 9, or 12 months. At the end of every month,
all stocks in each country are sorted into one of ten decile portfolios based on past six month
returns. The sample period is from January of 1990 to December of 2010 All portfolios are
equally-weighted. t-statistics are reported in parentheses. The t-statistics of the averages are
based on the momentum profits of the sample countries. *** 1% significant, ** 5% significant, *
10% significant

Country

K=3 months

Monthly Returns (%)

K=6 months
K=9 months

K=12 months

Countries showing momentum

Australia

***

0.47(2.53)***

0.29(1.81)*

-0.06(-0.45)

0.82(3.03)

Canada

0.61(1.94)

0.77(3.38)***

0.75(3.93)***

0.43(2.67)***

France

1.51(4.90)***

0.92(6.60)***

1.01(5.35)***

0.62(4.02)***

***

0.98(5.04)***

0.81(4.59)***

0.50(3.50)***

***

1.06(5.96)***

1.06(6.79)***

0.81(6.87)***

***

1.57(7.29)***

1.20(6.47)***

0.92(5.69)***

***

0.87(3.30)***

0.52(2.22)**

0.30(1.64)*

***

1.47(7.63)***

1.24(7.59)***

1.03(7.63)***

U.K.

***

1.69(6.22)

1.25(6.22)***

1.01(5.52)***

0.68(4.48)***

U.S.

0.67(2.58)***

0.62(2.96)***

0.43(2.47)***

0.18(1.65)*

***

***

***

Germany
Italy
Netherland
Sweden
Switzerland

Average

1.22(4.80)
1.06(4.06)
1.77(5.54)
1.53(4.44)

1.65(6.20)

1.25 (9.02)

1.00 (8.97)

0.83 (7.98)

0.54 (5.02)***

Countries showing no momentum

Hong Kong

0.60(2.23)**

0.27(1.32)

-0.25(-1.39)

-0.37(-2.46)**

Japan

-0.22(-0.88)

-0.20(-1.10)

-0.19(-1.43)

-0.29(-2.76)***

Korea

-0.34(-1.07)

-0.38(-1.63)

-0.84 (-4.46)***

-0.80(-4.93)***

Taiwan

-0.30(-0.98)

0.09(0.40)

-0.07(-0.39)

-0.10(-0.88)

Average

-0.07 (-0.29)

-0.06 (-0.38)

23

**

-0.34 (-1.97)

-0.39 (-2.64)***

Table 5 Momentum Profits by Lo and MacKinlays (1990) Strategy

This table presents momentum profits (in percent) as suggested in Lo and MacKinlay(1990).
That is, the investment weight received by a security i at a given month t is given by
1N
,
where
1
is the equal-weighted market return at time
1, and j is
the length of
1, , the assessing period. Here j is 6 months. This is a zero-cost trading
strategy that buys past winners and sells short past losers, based on their past performance
relative to the performance of an equal-weighted market index. Momentum profits at time t are
determined by

j
.
The time-series average of
. The sample period is
j is reported as
1
from January of 1990 to December of 2010. t-statistics are reported in parentheses. *** 1%
significant, ** 5% significant, * 10% significant. The -statistic of the averages is based on the
values of the momentum profits of the sample countries.

Country

Momentum profits (%)

Country

Momentum Countries

Momentum profits (%)

Non-Momentum countries

Australia

0.17 (0.44)

Hong Kong

Canada

0.40 (0.74)

Japan

-0.97 (-2.20)**

France

1.07 (2.77)***

Korea

-0.70 (-1.15)

Taiwan

-0.10 (-0.22)

Average

-0.52 (-2.64)***

Germany

***

1.20 (2.89)

Italy

1.17 (3.58)***

Netherland

1.04 (4.21)***

Sweden

-0.30 (-0.65)

0.48 (1.24)

Switzerland

1.33 (3.43)***

U.K.

1.16 (2.80)***

U.S.
Average

0.48 (1.65)*
0.85 (6.43)***

24

Table 6 Decomposition of Momentum Profits over the Whole Sample Period

This table presents the expected momentum profit (in percent) and its decomposed value over
the whole sample period from January 1990 to December 2010. The expected momentum
profits is the sum of the three time series averages of each component;
(
;
;
time series average of first-order serial covariance of the market returns),
(
time series average of the average of first-order serial covariances of the N individual assets),
; time series average of cross-sectional variances of mean returns of
and
(
the N individual assets).
Expected profit

Country
Momentum Countries
Australia
Canada
France
Germany
Italy
Netherland
Sweden
Switzerland
U.K.
U.S.
Average

0.096
-0.580
-0.041
0.290
0.741
0.120
0.793
0.303
1.403
0.021
0.315

-1.599
-1.780
-0.094
0.163
0.893
0.267
0.120
0.746
-0.167
-0.144
-0.160

4.501
3.332
3.525
3.885
0.938
1.081
3.336
0.749
3.985
0.823
2.616

2.807
2.131
3.473
3.759
1.091
1.228
2.688
1.192
2.416
0.658
2.071

2.612
0.566
1.015
0.920
1.278

0.760
-0.139
-0.408
0.490
0.176

Non-Momentum Countries
Hong Kong
Japan
Korea
Taiwan
Average

-0.521
-1.417
0.540
-0.462
-0.466

-2.373
-2.122
-0.884
-0.892
-1.568

25

Table 7 Decomposition of Momentum Profits over the Subperiods

This table is analogous to Table 5 except that it presents the expected momentum profit (in percent) and its decomposed value over the two subperiods; January 1990 to December 1999 and January 2000 to December 2010. The expected momentum profits is the sum of the three time series
averages of each component;
(
; time series average of first-order serial covariance of the market returns),
(
;
; time series average of
time series average of the average of first-order serial covariances of the N individual assets), and
(
cross-sectional variances of mean returns of the N individual assets).
Expected profit

Country

Australia
Canada
France
Germany
Italy
Netherland
Sweden
Switzerland
U.K.
U.S.
Average
Hong Kong
Japan
Korea
Taiwan
Average

1.392
0.109
-1.113
-0.656
0.578
-0.514
0.689
-0.237
1.004
0.056
0.131

Sub-period 1: Jan 1990 Dec 1999

Momentum countries
0.342
5.882
-0.324
5.238
-1.387
6.111
-0.115
5.895
0.790
2.745
-0.721
2.210
0.343
4.808
0.188
1.417
0.218
5.429
0.274
1.830
-0.039
4.157

-0.386
-2.259
1.150
-0.590
-0.521

Non-Momentum countries
-1.473
3.730
-2.535
0.988
-0.772
2.668
-1.007
3.169
-1.447
2.639

4.831
4.805
5.837
6.436
2.958
2.003
4.462
1.841
4.644
2.049
3.987
2.643
0.712
0.746
2.752
1.713

26

Expected profit

-1.024
-1.175
0.884
1.106
0.881
0.667
0.883
0.768
1.747
-0.010
0.473

Sub-period 2: Jan 2000 Dec 2010

Momentum countries
-3.275
5.373
-3.038
4.292
1.024
3.692
0.404
4.059
0.982
1.171
1.120
4.265
-0.072
4.198
1.227
1.093
-0.499
4.491
-0.505
1.342
-0.263
3.398

3.122
2.429
3.832
3.357
1.272
4.717
3.243
1.552
2.246
0.845
2.662

-0.637
-0.689
0.013
-0.352
-0.416

Non-Momentum countries
-3.151
3.780
-1.765
2.891
-0.981
2.716
-0.793
1.586
-1.673
2.743

1.266
1.815
1.722
1.145
1.487

Table 8 Relative Importance of Each Component of Momentum Profits over the Whole
Sample Period
This table shows the relative importance of each component of the expected momentum profits,
.
=
+
, where
is the time series average of firstj
order serial covariance of the market returns and
is the time series average of the average
of first-order serial covariances of the N individual assets.
is the time series average of
cross-sectional variances of mean returns of the N individual assets. The sample period is from
January 1990 to December 2010.

Country

Expected
profit

|
j

Relative proportion
|

Momentum countries
Australia
Canada
France
Germany
Italy
Netherland
Sweden
Switzerland
U.K.
U.S.
Average

2.807
2.131
3.473
3.759
1.091
1.228
2.688
1.192
2.416
0.658
2.071

-1.695
-1.200
-0.053
-0.127
0.152
0.147
-0.673
0.443
-1.570
-0.165
-0.474

4.501
3.332
3.525
3.885
0.938
1.081
3.336
0.749
3.985
0.823
2.616

0.604
0.563
0.015
0.034
0.139
0.120
0.250
0.372
0.650
0.251
0.300

-0.274
-0.265
-0.015
-0.032
0.139
0.120
-0.168
0.372
-0.283
-0.167
-0.057

0.726
0.735
0.985
0.968
0.861
0.880
0.832
0.628
0.717
0.833
0.817

2.655
2.777
66.509
30.591
6.171
7.354
4.957
1.691
2.538
4.988
13.023

0.585
0.445
0.416
0.681
0.532

1.410
0.803
0.713
2.140
1.266

Non-Momentum countries
Hong Kong
Japan
Korea
Taiwan
Average

0.760
-0.139
-0.408
0.490
0.176

-1.852
-0.705
-1.424
-0.430
-1.103

2.612
0.566
1.015
0.920
1.278

2.437
5.072
3.490
0.878
2.969

27

-0.415
-0.555
-0.584
-0.319
-0.468

Table 9 Relative Importance of Each Component of Momentum Profits over the Subperiods
This table is analogous to Table 7 except that over the two subperiods, it presents the relative importance of each component of the expected
.
=
+
, where
is the time series average of first-order serial covariance of the
momentum profits,
j
market returns and
is the time series average of the average of first-order serial covariances of the N individual assets.
is the time series
average of cross-sectional variances of mean returns of the N individual assets. The sample period is from January 1990 to December 2010.
Expected
profit

|
j

Relative proportion
|

Expected
profit

Sub-period 1: Jan 1990 Dec 1999

Australia
Canada
France
Germany
Italy
Netherland
Sweden
Switzerland
U.K.
U.S.

4.831
4.805
5.837
6.436
2.958
2.003
4.462
1.841
4.644
2.049

-1.050
-0.433
-0.274
0.541
0.212
-0.207
-0.346
0.425
-0.786
0.218

5.882
5.238
6.111
5.895
2.745
2.210
4.808
1.417
5.429
1.830

Average

3.987

-0.170

4.157

Momentum countries
0.217
-0.151
0.090
-0.076
0.047
-0.043
0.084
0.084
0.072
0.072
0.103
-0.086
0.078
-0.067
0.231
0.231
0.169
-0.126
0.106
0.106
0.120

-0.006

Hong Kong
Japan
Korea
Taiwan

2.643
0.712
0.746
2.752

-1.087
-0.276
-1.922
-0.417

Non-Momentum countries
3.730
0.411
-0.226
0.988
0.388
-0.218
2.668
2.576
-0.419
3.169
0.152
-0.116

Average

1.713

-0.926

2.639

0.882

-0.245

|
j

Relative proportion
|

Sub-period 2: Jan 2000 Dec 2010

0.849
0.924
0.957
0.916
0.928
0.914
0.933
0.769
0.874
0.894

5.602
12.097
22.303
10.896
12.948
10.676
13.896
3.334
6.907
8.394

0.896

10.705

3.122
2.429
3.832
3.357
1.272
4.717
3.243
1.552
2.246
0.845
2.662

0.774
0.782
0.581
0.884

3.431
3.580
1.388
7.600

1.266
1.815
1.722
1.145

0.755

4.000

1.487

28

-2.251
-1.863
0.140
-0.702
0.101
0.453
-0.955
0.459
-2.246
-0.495
-0.736

Momentum countries
5.373
0.721
-0.295
4.292
0.767
-0.303
3.692
0.037
0.037
4.059
0.209
-0.148
1.171
0.079
0.079
4.265
0.096
0.119
4.198
0.294
-0.185
1.093
0.296
0.296
4.491
1.000
-0.333
1.342
0.586
-0.269
3.398

0.409

-0.100

0.705
0.697
0.963
0.852
0.921
1.119
0.815
0.704
0.667
0.731
0.817

2.387
2.304
26.371
5.780
11.594
9.415
4.396
2.381
2.000
2.711
6.934

-2.514
-1.076
-0.994
-0.441

Non-Momentum countries
3.780
1.986
-0.399
2.891
0.593
-0.271
2.716
0.577
-0.268
1.586
0.385
-0.218

0.601
0.729
0.732
0.782

1.504
2.687
2.732
3.596

-1.256

2.743

0.711

2.630

0.885

-0.289

Figure 1 Decomposition of Momentum Profits

This figure shows the relative magnitude of
(cross-sectional dispersion in unconditional
mean stock returns) and
(predictability-profitability index) in the total momentum profits.
The part for
indicate the relative proportion of
to the sum of the absolute values of
|
|
and
; that is, it equals
. Likewise, the part for
indicate
the relative proportion of
to the sum of the absolute values of
and
; that is, it
|
|
equals
.

Momentum countries
100%
80%
60%
40%
20%
0%
-20%
-40%
P

Non-Momentum countries
80%
60%
40%
20%
0%
-20%
-40%

Hong Japan Korea Taiwan

Kong

-60%
P

29