English

Customer Momentum

Pricing of Securities 2023-01-30 v1 General Finance Statistical Finance

Abstract

This paper examines customer momentum, defined as a positive relationship between a firm's returns and past returns of its customers. I confirm previous evidence (Cohen and Frazzini 2008) that customer momentum is both statistically and economically significant. Long-short equally-weighted (value-weighted) decile portfolio generates a monthly return of 122 (106) basis points and a t-statistic above 4 (2.8) with respect to Fama-French factor models. The paper reports that customer momentum neither explains nor is explained by price momentum and earnings momentum. Customer momentum is partially driven by the lead-lag relationship between small and large stocks. I find that in the post-discovery sample, customer momentum has a smaller magnitude and loses statistical significance. The results are consistent with the hypothesis that after its discovery, customer momentum decreased due to exploitation by investors.

Keywords

Cite

@article{arxiv.2301.11394,
  title  = {Customer Momentum},
  author = {Mykola Pinchuk},
  journal= {arXiv preprint arXiv:2301.11394},
  year   = {2023}
}
R2 v1 2026-06-28T08:22:22.761Z