Profitability Of Price, Earnings And Revenue Momentum Strategies: The Indian Evidence
Momentum has remained an unsettled anomaly in finance. In this paper, we examine the profitability of univariate and multivariate sorted momentum strategies based on prior returns, earnings surprises and revenue surprises using the data for 493 companies that form part of Bombay Stock Exchange (B...
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| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Asian Academy of Management (AAM)
2015
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| Subjects: | |
| Online Access: | http://eprints.usm.my/40030/1/AAMJAF_11%281%29_2015-Art._3%2847-84%29.pdf http://eprints.usm.my/40030/ http://web.usm.my/journal/aamjaf/11-1-3-2015.html |
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| Summary: | Momentum has remained an unsettled anomaly in finance. In this paper, we examine the
profitability of univariate and multivariate sorted momentum strategies based on prior
returns, earnings surprises and revenue surprises using the data for 493 companies that
form part of Bombay Stock Exchange (BSE) 500 index in India from January 2002 to
June 2010. Momentum profits are found to be persistent in the intermediate horizon (up
to six months). Price momentum winners provide higher returns vis-à-vis earnings and
revenue momentum winners. On long-short basis, earnings momentum strategy is most
profitable. Earnings momentum is able to subsume price and revenue momentum.
Further, the informational content of revenue surprises is incrementally very small.
Triple sorted momentum portfolio using all the three criteria provides the highest return
of 2.28% per month. The Capital Asset Pricing Model (CAPM) and the Fama-French
model fail to explain these returns. The post-holding analysis reveals strong overreaction
patterns for both winners as well as losers, thus, supporting the behavioural explanation.
Momentum winners and losers perform better during market upturns. This study
contributes to the asset pricing and behavioral finance literature especially for emerging
markets such as India. |
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