Abstract
In this note we document interactive relations between the excess volatility and the momentum effect in the cross-section of stock returns over the sample periods of 1963-1989, 1990-2010 and 1963-2010, along the line explored lately in Wang and Ma (2014). The nature of interactive relations between the two appears to be very complicated. For example, the most profitable strategy is to buy the loser portfolio with the greatest excess volatility and sell the loser or winner portfolio with the least excess volatility for all the three periods. But there are profitable strategies of buying a winner portfolio and selling a loser portfolio. The contrarian strategy of buying the loser portfolio with the greatest excess volatility and selling any winner portfolio is always profitable for all three periods.
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