Industry momentum: an exchange‐traded funds approach

Price momentum is a well-documented anomaly in many of the world’s equity markets, and refers to the excess returns due to buying(selling) past winner(loser) stocks. Industry momentum refers to the excess returns due to buying(selling) stocks from past winner(loser) industries, and has been demonstrated to be more profitable than individual stock momentum in the US. We investigate whether industry momentum can be captured by investing with Sector ETFs. The performance of Sector ETF-based industry momentum is very different to stock momentum, and the strong performance of an unexpected group of Sector ETF momentum portfolios remain robust after controlling for risk.