Price Momentum
My paper "Corporate innovation and its effects on equity returns" (co-authored with Kodjo Apedjinou) provides a rational explanation for price momentum. Corporate innovation is the change in a firm's gross profit margin, which cannot be explained by its growth in capital and labor. "Winners" are firms with the highest level of corporate innovation among momentum portfolios. Similarly, "losers" are the firms with the lowest levels (negative) corporate innovation among momentum portfolios. Momentum strategies are profitable, only when the winners are chosen from a pool of high corporate innovation stocks. Click on the title to learn more about corporate innovation and what price momentum strategies proxy for.
