Price Momentum and Idiosyncratic Volatility

Authors

Matteo Arena, Marquette UniversityFollow
K. Stephen Haggard, Missouri State University
Xuemin (Sterling) Yan, University of Missouri - Columbia

Document Type

Article

Publication Date

5-2008

Publisher

Wiley

Source Publication

Financial Review

Source ISSN

0732-8516

Original Item ID

DOI:

Abstract

We find that returns to momentum investing are higher among high idiosyncratic volatility (IVol) stocks, especially high IVol losers. Higher IVol stocks also experience quicker and larger reversals. The findings are consistent with momentum profits being attributable to underreaction to firm-specific information and with IVol limiting arbitrage of the momentum effect. We also find a positive time-series relation between momentum returns and aggregate IVol. Given the long-term rise in IVol, this result helps explain the persistence of momentum profits since Jegadeesh and Titman’s (1993) study.

Comments

Accepted version. Financial Review, Vol. 43, No. 2 (May 2008): 159-190. DOI. © 2008 Wiley. Used with permission.

Recommended Citation

Arena, Matteo; Haggard, K. Stephen; and Yan, Xuemin (Sterling), "Price Momentum and Idiosyncratic Volatility" (2008). Finance Faculty Research and Publications. 2.
https://epublications.marquette.edu/fin_fac/2