TY  - JOUR
AU  - Hong,Harrison
AU  - Lim,Terence
AU  - Stein,Jeremy C.
TI  - Bad News Travels Slowly: Size, Analyst Coverage and the Profitability of Momentum Strategies
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6553
PY  - 1998
Y2  - May 1998
UR  - http://www.nber.org/papers/w6553
L1  - http://www.nber.org/papers/w6553.pdf
N1  - Author contact info:
Harrison Hong
Department of Economics
Princeton University
26 Prospect Avenue
Princeton, NJ 08540
Tel: 609/258-0259
Fax: 609/258-0771
E-Mail: hhong@princeton.edu

Jeremy C. Stein
Department of Economics
Harvard University
Littauer 209
Cambridge, MA  02138
Tel: 617/496-6455
Fax: 617/496-7352
E-Mail: jeremy_stein@harvard.edu
M2  - featured in NBER digest on 1998-11-01
AB  - A number of theories have been proposed to explain the medium-term momentum in stock returns identified by Jegadeesh and Titman (1993).  We test one such theory--based on the gradual-information-diffusion model of Hong and Stein (1997)--and establish three key results.  First, once one moves past the very smallest stocks (where thin market-making capacity appears to be an issue) the profitability of momentum strategies declines sharply with firm size.  Second, holding size fixed, momentum strategies work particularly well among stocks which have low analyst coverage.  Finally, there is a strong asymmetry: the effect of analyst coverage is much more pronounced for stocks that are past losers than for stocks that are past winners. These findings are consistent with the hypothesis that firm-specific information only gradually across the investing public.
ER  -