Momentum in real economy and industry stock returns

Research output: Contribution to journalArticlepeer-review


This study investigates the relationship between the real economy and stock prices in the context of momentum strategies. While past research has examined momentum in terms of data embedded in market activity, we show that momentum is affected by data from real activity. Using United States sectoral output indices, we show that once the industry effect is considered, the momentum in stocks may lose significance in many cases. In several strategies, the influence of real sectors generates significant anomalous returns and remains robust even when the influence of stock indices is taken into account. The presence of momentum may imply that the world market factor should be augmented with a momentum factor. However, beyond mechanically accounting for a momentum factor without the proper economic mechanism that establishes its relevance, multifactor models are criticized for purely matching the data rather than basing it on solid economic arguments. This paper responds to this criticism by attempting to understand the source of the cross-country model from a real-output perspective.

Original languageEnglish
Article number100576
JournalJournal of Behavioral and Experimental Finance
StatePublished - Dec 2021
Externally publishedYes

Bibliographical note

Publisher Copyright:
© 2021 Elsevier B.V.


  • Economic sectors
  • Factor investing
  • Investments
  • Market returns
  • Momentum
  • Real sectors
  • Size

ASJC Scopus subject areas

  • Finance


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