Abstract
Our study focusses on establishing portfolio-based momentum profits in the Indian market, and on designing a model to identify portfolio-specific and macroeconomic factors generating abnormal returns. We empirically examine returns of long-term and short-term winners and losers’ portfolios to establish the existence of extra-normal profits similar to those documented by Jegadeesh and Titman (1993). Using vector autoregressive methodology, we find price–earnings ratio, price–book ratio, and net foreign institutional inflows as significant factors in momentum generation. We further decompose momentum profits to test for time-series, cross-sectional and lead-lag components. Our study provides insights to portfolio managers in exploring the concept of momentum during portfolio designing.
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