Narrow Results

Firms can have fundamental similarities and relatedness such as operating in the same geographic area and industries, being customers or suppliers. Understanding these connections has implications for cross-asset return predictability because information can flow through these linkages sluggishly. We introduce a novel peer momentum by linking firms that are co-searched by investors on the SEC EDGAR server. A trading strategy based on this peer momentum generates an annualized return of 13%, and it remains robust when controlling for other peer momentum, known asset pricing anomalies, and firm characteristics. Moreover, it outperforms the shared-analyst peer momentum identified by Ali and Hirshleifer (2020).

This study investigates the momentum profits and provides a systematic risk as well as time-varying unsystematic risk explanation, adopting the monthly returns in the Taiwan stock market during 2003–2008 periods. Through the regression models including and combining the CAPM, Fama–French three factor model, GARCH(1,1)-M and TGARCH(1,1)-M, the main results are as follows. First, most of the momentum strategies have not significant positive returns. Next, CAPM as well as Fama and French factors could roughly explain momentum returns. Additionally, it may make some profits likely if the time-varying unsystematic risk is further considered in an investment strategy. Moreover, the return volatility for the portfolio of winners is more sensitive to recent news than the losers. Conversely, the return volatility of the loser is more sensitive to distant news and has a larger response to bad news than the winner. Finally, TGARCH-M related models usually perform better than GARCH-M ones; this infers the presence of leverage effect in Taiwan stock market.