Co-momentum and Stock Market Returns

摘要

As a proxy for valuable information related to momentum trading, Co-momentum variable is created based on average correlations for daily stock returns between consecutive trading days within a given period. This paper finds a negative relationship between Co-momentum and future market excess return from the US data, and the Co-momentum variable provides new and valuable information in addition to a large set of popular return predictors including average correlation, investor sentiment and price-to-dividend ratio. Furthermore, the success of Co-momentum does not depend on the forecast horizon and is robust to a variety of predictive tests.