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International Price And Earnings Momentum

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Executive Summary

The authors find that price and earnings momentum are pervasive features of international equity markets when controlling for data snooping biases. In explaining the momentum phenomenon they show that European price momentum is subsumed by earnings momentum on an aggregate level, however, this rationale does not apply to each and every country. While the above explanation is confined to certain time periods in the U.S., earnings momentum nevertheless appears to be a crucial driver of the price momentum anomaly in many markets. Since they cannot establish a decent relation between momentum and macroeconomic risks they suspect a behavioral-based explanation to be at work.

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