Analysis of Business Week Hot-Growth Stocks: Momentum and Fundamental Investment Approaches
Journal of Asset Management, 2009
Posted: 29 Dec 2008 Last revised: 11 Jan 2011
Date Written: September 28, 2008
Abstract
This paper extends Bauman, Conover, and Cox (2002) and investigates the risk-adjusted returns for the first-timers and repeaters of the Business Week hot-growth stocks. Chan, Jegadeesh, and Lakonishok's (1996) short-term six-month momentum model provides significant returns for the first-timers as well as for stocks that had already appeared on the list at least once, the repeaters. On the other hand, Mohanram's (2005) fundamental model provides significant returns for the repeaters only. A portfolio formed by purchasing the repeaters and short selling the first-timers generates significant returns in ten out of twelve months after publication. We conclude that profitable long/short portfolios can be implemented on these growth stocks in addition to the short-only strategy as implied in Bauman et al (2002).
Keywords: Market Efficiency, Momentum
JEL Classification: G11, G14
Suggested Citation: Suggested Citation