Momentum Investing and Business Cycle Risk: Evidence from Pole to Pole
Published: 11/7/2003, Volume: 58, Issue: 6 | DOI: 10.1046/j.1540-6261.2003.00614.x | Cited by: 754
John M. Griffin, Xiuqing Ji, J. Spencer Martin
AbstractWe examine whether macroeconomic risk can explain momentum profits internationally. Neither an unconditional model based on the Chen, Roll, and Ross (1986) factors nor a conditional forecasting model based on lagged instruments provides any evidence that macroeconomic risk variables can explain momentum. In addition, momentum profits around the world are economically large and statistically reliable in both good and bad economic states. Further, these momentum profits reverse over 1‐ to 5‐year horizons, an action inconsistent with existing risk‐based explanations of momentum.
Insider Trading in the OTC Market
Published: 9/1990, Volume: 45, Issue: 4 | DOI: 10.1111/j.1540-6261.1990.tb02436.x | Cited by: 279
JI‐CHAI LIN, JOHN S. HOWE
In this paper, we examine the profitability of insider trading in firms whose securities trade in the OTC/NASDAQ market. Although the evidence suggests timing and forecasting ability on the part of insiders, high transaction costs (especially bid‐ask spreads) appear to eliminate the potential for positive abnormal returns from active trading. By implication, outside investors who mimic the trading of insiders are also precluded from earning abnormal profits. In addition, we provide evidence on the determinants of insiders' profits. The data suggest that insiders closer to the firm trade on more valuable information than insiders removed from the firm.
Inalienable Customer Capital, Corporate Liquidity, and Stock Returns
Published: 7/24/2020, Volume: 76, Issue: 1 | DOI: 10.1111/jofi.12960 | Cited by: 85
WINSTON WEI DOU, YAN JI, DAVID REIBSTEIN, WEI WU
We develop a model in which customer capital depends on key talents' contribution and pure brand recognition. Customer capital guarantees stable demand but is fragile to financial constraints risk if retained mainly by talents, who tend to quit financially constrained firms, damaging customer capital. Using a proprietary, granular brand‐perception survey, we construct a firm‐level measure of the inalienability of customer capital (ICC) that captures the degree to which customer capital depends on talents. Firms with higher ICC have higher average returns, higher talent turnover, and more precautionary financial policies. The ICC‐sorted long‐short portfolio's spread comoves with financial constraints factor.
Feedback and Contagion through Distressed Competition
Published: 10/8/2026, Volume:
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, Issue:
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| DOI: 10.1111/jofi.70080 | Cited by: 0
HUI CHEN, WINSTON WEI DOU, HONGYE GUO, YAN JI
Firms tend to compete more aggressively when facing financial distress. This intensified competition reduces profit margins, pushing them further into distress and adversely affecting their industry peers. To study such feedback and contagion effects, we incorporate strategic competition in a dynamic model with long‐term defaultable debt, exploring various peer interactions such as predation and price wars. The feedback effect represents a novel source of financial distress costs associated with leverage, which helps explain the negative profitability‐leverage relation across industries. Owing to the contagion effect, firms' optimal leverage is often excessively high from an industry perspective, undermining the industry's financial stability.