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Cross-momentum: Tracking idiosyncratic shocks
Stockholm University, Faculty of Social Sciences, Stockholm Business School.
Number of Authors: 12021 (English)In: International Review of Economics and Finance, ISSN 1059-0560, E-ISSN 1873-8036, Vol. 71, p. 177-199Article in journal (Refereed) Published
Abstract [en]

In the presence of slow diffusion of information, the transmission of idiosyncratic shocks through economically linked firms leaves footprints in the prices. In this paper, we estimate the links between firms using past prices and predict the average shock exerted to each firm in the entire cross-section. The long-short cross-momentum portfolio constructed based on average shocks yields significant alphas and performs well in explaining variation in returns.

Place, publisher, year, edition, pages
2021. Vol. 71, p. 177-199
Keywords [en]
Idiosyncratic shock propagation, Linked firms, Information diffusion
National Category
Economics and Business
Identifiers
URN: urn:nbn:se:su:diva-190082DOI: 10.1016/j.iref.2020.05.015ISI: 000598180200011OAI: oai:DiVA.org:su-190082DiVA, id: diva2:1528782
Available from: 2021-02-16 Created: 2021-02-16 Last updated: 2022-02-25Bibliographically approved

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Zareei, Abalfazl

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