Macroeconomic risk and seasonality in momentum profits
Xiuqing Ji (College of Business, Governors State University),J. Spencer Martin (Faculty of Business and Economics, University of Melbourne),Yaqiong Yao (Department of Accounting and Finance, Lancaster University Management School)
We contribute to the growing debate on the relation between macroeconomic risk and stock price momentum. Not only is momentum seasonal, so is its net factor exposure.We show that winners and losers only differ in macroeconomic factor loadings inJanuary, the one month when losers overwhelmingly outperform winners. In the remainder of the year, when momentum does exist, winner and loser factor loadings offset nearly completely. Furthermore, the magnitude of macroeconomic risk premia appears to seasonally vary contra momentum. In contrast, the relatively new profitability factor does a much better job of capturing the described seasonality.
Keywords: Momentum, Macroeconomicrisk, ROE, Seasonality, January effects