Price behavior of small-cap stocks and momentum: A study using principal component momentum

Cheoljun Eom, Jong Won Park

Research output: Contribution to journalArticlepeer-review

1 Scopus citations


This study analyzes why the negative momentum effect appears in Asian (China, Japan, Korea) stock markets, contrary to the U.S. market. We use principal component momentum (PMOM), a newly devised momentum measure. The PMOM is constructed by extracting commonalities from traditional momentum measures using principal component analysis. The results show evidence of positive and negative momentum profits in the U.S. and Asian markets, respectively. Negative momentum profits in Asian markets are attributable to the strong performance reversal of small stocks in the loser portfolio. Conversely, the positive momentum profits of the U.S. market are driven by the performance continuity of small stocks in the winner portfolio. The PMOM strategy is significantly more advantageous than traditional momentum strategies, based on the economic and statistical perspectives of momentum profits. These results are robust to changes in empirical designs.

Original languageEnglish
Article number101908
JournalResearch in International Business and Finance
StatePublished - Apr 2023


  • Asian stock markets
  • Momentum
  • Principal component momentum
  • Small-cap stocks
  • US stock market


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