Hostname: page-component-745bb68f8f-g4j75 Total loading time: 0 Render date: 2025-01-20T17:38:22.493Z Has data issue: false hasContentIssue false
  • English
  • Français

Text-Based Industry Momentum

Published online by Cambridge University Press:  09 November 2018

Gerard Hoberg  and
Gordon M. Phillips
Rights & Permissions [Opens in a new window]

Abstract

Core share and HTML view are not available for this content. However, as you have access to this content, a full PDF is available via the ‘Save PDF’ action button.

We test the hypothesis that low-visibility shocks to text-based network industry peers can explain industry momentum. We consider industry peer firms identified through 10-K product text and focus on economic peer links that do not share common Standard Industrial Classification (SIC) codes. Shocks to less visible peers generate economically large momentum profits and are stronger than own-firm momentum variables. More visible traditional SIC-based peers generate only small, short-lived momentum profits. Our findings are consistent with momentum profits arising partially from inattention to economic links of less visible industry peers.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 53 , Issue 6 , December 2018 , pp. 2355 - 2388
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2018 

Footnotes

1

We thank Jennifer Conrad (the editor), Michael Cooper, Kewei Hou (the referee), Dongmei Li, Peter MacKay, Oguz Ozbas, Jiaping Qiu, Merih Sevilir, Albert Sheen, Denis Sosyura, and seminar participants at the 2014 Conference on Financial Economics and Accounting, Duisenberg School of Finance and Tinbergen Institute, Erasmus University, Hebrew University, Interdisciplinary Center of Herzliya, McMaster University, Rotterdam School of Management, Stanford University, Tel Aviv University, Tilberg University, University of Chicago, University of Illinois, the University of Mannheim, the University of Miami, and the University of Utah for helpful comments. All errors are the authors’ alone.

References

Barberis, N.; Shleifer, A.; and Vishny, R.. “A Model of Investor Sentiment.” Journal of Financial Economics, 49 (1998), 307–343.Google Scholar
Cohen, L., and Frazzini, A.. “Economic Links and Predictable Returns.” Journal of Finance, 63 (2008), 1977–2011.Google Scholar
Davis, J.; Fama, E.; and French, K.. “Characteristics, Covariances, and Average Returns: 1929–1997.” Journal of Finance, 55 (2000), 389–406.Google Scholar
Fama, E., and French, K.. “The Cross-Section of Expected Stock Returns.” Journal of Finance, 47 (1992), 427–465.Google Scholar
Fama, E., and French, K.. “Industry Costs of Equity.” Journal of Financial Economics, 43 (1997), 153–193.Google Scholar
Fama, E., and MacBeth, J. D.. “Risk, Return, and Equilibrium: Empirical Tests.” Journal of Political Economy, 81 (1973), 607–636.Google Scholar
Gebhardt, W.; Hvidkjaer, S.; and Swaminathan, B.. “Stock and Bond Market Interaction: Does Momentum Spill Over?” Journal of Financial Economics, 75 (2005), 651–690.Google Scholar
Gervais, S.; Kaniel, R.; and Mingelgrin, D.. “The High-Volume Return Premium.” Journal of Finance, 56 (2001), 877–919.Google Scholar
Griffin, J.; Ji, X.; and Martin, J.. “Momentum Investing and Business Cycle Risk: Evidence from Pole to Pole.” Journal of Finance, 58 (2003), 2515–2547.Google Scholar
Grundy, B., and Martin, J.. “Understanding the Nature of the Risks and the Source of the Rewards to Momentum Investing.” Review of Financial Studies, 14 (2001), 29–78.Google Scholar
Hoberg, G., and Phillips, G.. “Product Market Synergies and Competition in Mergers and Acquisitions: A Text-Based Analysis.” Review of Financial Studies, 23 (2010), 3773–3811.Google Scholar
Hoberg, G., and Phillips, G.. “Text-Based Network Industry Classifications and Endogenous Product Differentiation.” Journal of Political Economy, 124 (2016), 1423–1465.Google Scholar
Hong, H., and Stein, J.. “A Unified Theory of Underreaction, Momentum Trading, and Overreaction in Asset Markets.” Journal of Finance, 54 (1999), 2134–2184.Google Scholar
Hou, K.“Industry Information Diffusion and the Lead-Lag Effect in Stock Returns.” Review of Financial Studies, 20 (2007), 1113–1138.Google Scholar
Jegadeesh, N., and Titman, S.. “Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency.” Journal of Finance, 48 (1993), 65–91.Google Scholar
Jegadeesh, N., and Titman, S.. “Profitability of Momentum Strategies: An Evaluation of Alternative Explanations.” Journal of Finance, 56 (2001), 699–720.Google Scholar
Jegadeesh, N., and Titman, S.. “Momentum.” Annual Review of Financial Economics, 3 (2011), 493–509.Google Scholar
Kacperczyk, M.; Sialm, C.; and Zheng, L.. “On the Industry Concentration of Actively Managed Equity Mutual Funds.” Journal of Finance, 60 (2005), 1983–2011.Google Scholar
McLean, R. D., and Pontiff, J.. “Does Academic Research Destroy Stock Return Predictability.” Journal of Finance, 71 (2016), 5–32.Google Scholar
Menzley, L., and Ozbas, O.. “Market Segmentation and Cross-Predictability of Returns.” Journal of Finance, 65 (2010), 1555–1580.Google Scholar
Moskowitz, T., and Grinblatt, M.. “Do Industries Explain Momentum.” Journal of Finance, 54 (1999), 1249–1290.Google Scholar
Newey, W. K., and West, K. D.. “A Simple, Positive Semi-Definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix.” Econometrica, 55 (1987), 703–708.Google Scholar
Rouwenhorst, G.“International Momentum Strategies.” Journal of Finance, 53 (1998), 267–284.Google Scholar
Rouwenhorst, G.“Local Return Factors and Turnover in Emerging Stock Markets.” Journal of Finance, 54 (1999), 1439–1464.Google Scholar
Supplementary material: File

Hoberg and Phillips supplementary material

Online Appendices

Download Hoberg and Phillips supplementary material(File)
File 130.5 KB