Momentum Investing and Business Cycle Risk: Evidence from Pole to Pole


  • John M. Griffin,

  • Xiuqing Ji,

  • J. Spencer Martin

    Search for more papers by this author
    • Griffin is visiting Yale University and is at McCombs School of Business, The University of Texas at Austin. Ji is at Baruch College, The City University of New York. Martin is at W. P. Carey School of Business, Arizona State University. This paper was written while Griffin and Ji were with Arizona State University. We thank Bruce Grundy, Ro Gutierrez, David Hirshleifer, Kewei Hou, Andrew Karolyi, Mike Lemmon, Toby Moskowitz, Stefan Nagel (discussant), Federico Nardari, Ľuboš Pástor, René Stulz, Ingrid Werner, Karen Wruck, and especially an anonymous referee and Rick Green for helpful comments. We thank Patrick Kelly and Felix Meschke for ace research assistance. We are also grateful for the input of seminar participants at the American Finance Association meetings in Washington, the European Finance Association meetings in Berlin, The Ohio State University, and brown bag participants at Arizona State University. Any remaining errors are ours.


We examine whether macroeconomic risk can explain momentum profits internationally. Neither an unconditional model based on the Chen, Roll, and Ross (1986) factors nor a conditional forecasting model based on lagged instruments provides any evidence that macroeconomic risk variables can explain momentum. In addition, momentum profits around the world are economically large and statistically reliable in both good and bad economic states. Further, these momentum profits reverse over 1- to 5-year horizons, an action inconsistent with existing risk-based explanations of momentum.