학회소식
[2012년 제 1차] Momentum Profits and Idiosyncratic Volatility: The
작성자 : 관리자
조회수 : 837
게시일 :
2012-03-02
This article studies the profitability of momentum trading in the Korean stock market and examines relations between momentum returns and idiosyncratic volatilities to see whether the momentum profits can be explained by idiosyncratic volatility. We confirm momentum profits and find that idiosyncratic volatility plays an important role in momentum profits. First, when we analyze profits of portfolios formed by their price momentum for four holding periods (3, 6, 9,12 months), we find that momentum profits are significant in all four periods. However, we also find that the profitability decreases in holding periods. Second, momentum profits increase in idiosyncratic volatilities. Finally, we examine the Fama-French 3 factor model to see whether the systematic risk affects the momentum profits and find that the portfolio alpha is positive in most portfolios. That is, the systematic risk cannot explain momentum profits relative to idiosyncratic volatilities, which can be considered as a proxy for firm-specific information. Investors seem to underreact to firm-specific information and the stock market allows momentum profits, supporting one aspect of behavioral finance.
