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Economic activity and momentum profits: further evidence

Maio, P.; Philip, D.

Economic activity and momentum profits: further evidence Thumbnail


P. Maio


We show that economic activity plays an important role in explaining momentum-based anomalies. A simple two-factor model containing the market and alternative indicators of economic activity as risk factors—industrial production, capacity utilization rate, retail sales, and a broad economic index—offers considerable explanatory power for the cross-section of price and industry momentum portfolios. Hence past winners enjoy higher average returns than past losers because they have larger macroeconomic risk. The model compares favorably with popular multifactor models used in the literature. Moreover, our model is consistent with Merton’s Intertemporal CAPM framework, since the macro variables forecast stock market volatility and future economic activity.


Maio, P., & Philip, D. (2018). Economic activity and momentum profits: further evidence. Journal of Banking and Finance, 88, 466-482.

Journal Article Type Article
Acceptance Date Jan 22, 2018
Online Publication Date Jan 31, 2018
Publication Date Mar 1, 2018
Deposit Date Jan 22, 2018
Publicly Available Date Jul 31, 2019
Journal Journal of Banking and Finance
Print ISSN 0378-4266
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 88
Pages 466-482
Public URL
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