An Important Analysis of Stock Momentum and Reversal Factors

Can we explain stock momentum by industry, sector or factor momentum? Moreover, similar question could be raised about the short-term reversal. The novel research by Li and Turkington (2021) provides uses a robust regression model to divide momentum and reversal returns into the main drivers.The individual momentum anomaly that broader market groups do not fully explain exists in the whole sample but is statistically weak. On the other hand, the reversal anomaly is highly significant. Secondly, the traditional 12-months momentum can be better explained by the factor momentum than the industry or sector momentum. Still, the industries, industry groups, sectors, and even factors have distinct drivers, and the anomalies seem different.

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