Momentum life cycle, revisited

Tsung Yu Chen, Pin Huang Chou, Chia Hsun Hsieh, S. Ghon Rhee

Research output: Contribution to journalArticlepeer-review

1 Scopus citations


The momentum life cycle (MLC) hypothesis proposed by Lee and Swaminathan (2000) is spurious because it is largely driven by multiplying two widely documented effects on momentum and turnover. After controlling for these two effects, what remains is a negative return pattern for late-stage momentum, mostly driven by the higher returns of low-turnover losers. Although the higher returns of low-turnover losers disappear either under a risk adjustment or with the inclusion of NASDAQ stocks, they remain significant during periods of optimism, thus supporting the underreaction theory of momentum proposed by Hong and Stein (2007), whereby turnover proxies for the divergence of opinion among investors.

Original languageEnglish
Article number106119
JournalJournal of Banking and Finance
StatePublished - Jun 2021


  • Momentum life cycle
  • Price momentum
  • Trading volume


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