to do more ambiguous tasks. So, the evidence that the momentum effect is
stronger for growth stocks is consistent with the overconfidence hypothesis.
Lee and Swaminathan (2000) examine the relation between momentum
profits and turnover, and find that momentum is higher for stocks with
greater turnover. Table 10.9, which presents some of the results from their
paper, shows that momentum profits are almost three times as large for
stocks with the highest turnover than for stocks with the lowest turnover.
This finding is somewhat surprising when viewed from the transaction cost
376 JEGADEESH AND TITMAN
Table 10.8
Returns of Book-to-Market and Momentum Sorted PortfoliosFor this table all listed common stocks from the NYSE, AMEX, and NASDAQ are
sorted into three quintile groupings based on market capitalization, book-to-
market ratio and prior-year return. Panel A presents the average monthly returns
(in percentages) of 25 prior-year return/book-to-market sorted portfolios over the
1963:07–1997:12 period. These 25 portfolios are formed by equally weighting the
five corresponding size-sorted portfolios. Panel B examines similar strategies that
exclude the largest and smallest quintile stocks.
Panel A:Raw Returns, All Quintiles
Low B/M High H–L t-stat
Low 0.45 0.71 1.07 1.17 1.39 0.94 (5.27)
0.73 0.98 1.14 1.29 1.46 0.73 (4.75)
Past 0.92 1.06 1.17 1.30 1.37 0.45 (2.73)
returns
1.04 1.14 1.16 1.36 1.40 0.36 (1.93)
High 1.21 1.42 1.37 1.51 1.49 0.23 (1.45)
H–L 0.75 0.71 0.30 0.35 0.11 HH−LL
t-stat (3.84) (4.03) (1.87) (2.18) (0.59) 1.04 (5.66)
Panel B:Raw Returns, Quintiles 2–4 only
Low B/M High H–L t-stat
Low 0.55 0.65 1.06 1.16 1.53 0.98 (5.02)
0.69 0.97 1.16 1.17 1.51 0.82 (4.63)
Past 0.90 1.03 1.12 1.33 1.42 0.52 (2.74)
returns
1.00 1.10 1.15 1.40 1.43 0.43 (1.99)
High 1.34 1.50 1.41 1.52 1.61 0.27 (1.11)
H–L 0.79 0.85 0.34 0.36 0.08 HH−LL
t-stat (3.33) (4.26) (1.96) (2.13) (0.42) 1.06 (5.02)
Source: Daniel and Titman (1999).