Is Momentum really Momentum? International Evidence

Abstract

I examine the claim argued by Novy-Marx (2012) that the intermediate past performance of stock does better job in explaining conventional momentum profit. Using equity level data from 49 countries, I find that there exists a cross-country variation in the superiority of performance of momentum portfolio based on intermediate past return, and such variation can be explained by the individualism index established by Hofstede (2001). Partly confirming the finding by Chui, Titman, and Wei (2010), I argue that the finding by Novy-Marx is a manifestation of cross-country cultural differences that have direct impact on investor behavior, expressed in terms of momentum profit.