Does Stock Liquidity Explain the Premium for Stock Price Momentum?

Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216208%3A11230%2F14%3A10196409" target="_blank" >RIV/00216208:11230/14:10196409 - isvavai.cz</a>
Result on the web
<a href="http://journal.fsv.cuni.cz/mag/article/show/id/1293" target="_blank" >http://journal.fsv.cuni.cz/mag/article/show/id/1293</a>
DOI - Digital Object Identifier
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Result language
angličtina
Original language name
Does Stock Liquidity Explain the Premium for Stock Price Momentum?
Original language description
The empirically documented positive relationship between price momentum and subsequent stock returns constitutes a puzzle that evades a compelling theoretical explanation. This study analyzes one of the proposed explanations, namely that momentum is correlated with stock liquidity, which is the underlying factor affecting stock returns. We empirically test this proposition using the pre-crisis data from the Stockholm Stock Exchange covering the period between 1979 and 2005. The results from the Fama-MacBeth (1973) regressions provide some evidence that liquidity proxies are negatively correlated with average stock returns. However, contrary to the common prediction the inclusion of liquidity proxies does not significantly impact the explanatory power of momentum. This implies that stock liquidity is not a likely driver of short-term persistence in stock returns.
Czech name
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Czech description
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Type
J<sub>x</sub> - Unclassified - Peer-reviewed scientific article (Jimp, Jsc and Jost)
CEP classification
AH - Economics
OECD FORD branch
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Project
<a href="/en/project/GAP403%2F12%2F2166" target="_blank" >GAP403/12/2166: Accounting Earnings Management at Initial Public Offerings (IPO)</a><br>
Continuities
P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)

Publication year
2014
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

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