Momentum Investing and Business Cycle Risk: Evidence from Pole to Pole

  • Griffin J
  • Ji X
  • Martin J
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Abstract

We examine whether macroeconomic risk can explain momentum pro¢ts in- ternationally. Neither an unconditional model based on the Chen, Roll, and Ross (1986) factorsnoraconditional forecastingmodel basedon lagged instru- ments provides any evidence that macroeconomic risk variables can explain momentum. In addition,momentumpro¢ts around theworld are economically large and statistically reliable in both good and bad economic states. Further, thesemomentumpro¢ts reverse over 1- to 5-year horizons, an action inconsis- tent with existing risk-based explanations of momentum

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Authors

  • John M. Griffin

  • Xiuqing Ji

  • J. Spencer Martin

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