The Determinants of Momentum in the United Kingdom

Posted: 17 Jul 2006

See all articles by Tony Chieh-tse Hou

Tony Chieh-tse Hou

National Dong Hwa University

Phillip J. McKnight

University of St. Andrews - School of Management

Abstract

This study examines the effects of size, analyst coverage, and book-to-market in explaining momentum profits in UK stocks. We document a pattern of momentum in UK stocks and find that momentum profits are negatively related to firm size, analyst coverage, and book-to-market. We find that book-to-market is more important than coverage and coverage is more important than size in explaining momentum profits. We examine the book-to-market effect closely and find that a value premium exists for past stock losers, but a growth discount exists for past stock winners. Finally, the results of this study provide mixed support for the information diffusion hypothesis of Hong and Stein (1999).

Keywords: Momentum, Size, Book-to-market, Analyst coverage, United Kingdom

JEL Classification: G12, G14, G19

Suggested Citation

Hou, Tony Chieh-tse and McKnight, Phillip J., The Determinants of Momentum in the United Kingdom. Quarterly Review of Economics and Finance, Vol. 46, No. 2, pp. 227-240, May 2006, Available at SSRN: https://ssrn.com/abstract=917664

Tony Chieh-tse Hou

National Dong Hwa University ( email )

No. 1, Sec. 2, Da Hsueh Rd.
Shoufeng
Hualien, 97401
Taiwan

HOME PAGE: http://faculty.ndhu.edu.tw/~tonycthou/

Phillip J. McKnight (Contact Author)

University of St. Andrews - School of Management ( email )

The Gateway
Gateway
St. Andrews, Fife KY16 9SS
United Kingdom

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