Momentum in weekly returns: the role of intermediate-horizon past performance

Abstract

Gutierrez and Kelly (2008) recently documented momentum in weekly returns. Using the Australian market as a setting, we find that stocks with high 1-week returns exhibit a continuation in returns up to 1year after a brief initial return reversal. However, after controlling for the intermediate-horizon past performance, the continuation in returns after 1-week returns disappears. These findings suggest that different past investment horizons contain separate information about price momentum and that intermediate-term trends dominate short-term trends in driving future returns. Overall, we show that understanding momentum over different horizons facilitates the design of more profitable trading strategies.