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Text-Based Industry Momentum

  • Gerard Hoberg and Gordon M. Phillips
Abstract

We test the hypothesis that low-visibility shocks to text-based network industry peers can explain industry momentum. We consider industry peer firms identified through 10-K product text and focus on economic peer links that do not share common Standard Industrial Classification (SIC) codes. Shocks to less visible peers generate economically large momentum profits and are stronger than own-firm momentum variables. More visible traditional SIC-based peers generate only small, short-lived momentum profits. Our findings are consistent with momentum profits arising partially from inattention to economic links of less visible industry peers.

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Corresponding author
*Hoberg, hoberg@marshall.usc.edu, University of Southern California Marshall School of Business; Phillips (corresponding author), gordon.m.phillips@tuck.dartmouth.edu, Dartmouth College Tuck School of Business and National Bureau of Economic Research.
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We thank Jennifer Conrad (the editor), Michael Cooper, Kewei Hou (the referee), Dongmei Li, Peter MacKay, Oguz Ozbas, Jiaping Qiu, Merih Sevilir, Albert Sheen, Denis Sosyura, and seminar participants at the 2014 Conference on Financial Economics and Accounting, Duisenberg School of Finance and Tinbergen Institute, Erasmus University, Hebrew University, Interdisciplinary Center of Herzliya, McMaster University, Rotterdam School of Management, Stanford University, Tel Aviv University, Tilberg University, University of Chicago, University of Illinois, the University of Mannheim, the University of Miami, and the University of Utah for helpful comments. All errors are the authors’ alone.

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Journal of Financial and Quantitative Analysis
  • ISSN: 0022-1090
  • EISSN: 1756-6916
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