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Article

Dividends and Momentum

Owain ap Gwilym, Andrew D Clare, James Seaton and Stephen H Thomas
The Journal of Investing Summer 2009, 18 (2) 42-49; DOI: https://doi.org/10.3905/JOI.2009.18.2.042
Owain ap Gwilym
is professor of finance at Bangor Business School, Bangor University in Gwynedd, U.K.
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  • For correspondence: owain.apgwilym@bangor.ac.uk
Andrew D Clare
is professor of asset management at Cass Business School, City University in London, U.K.
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  • For correspondence: a.clare@city.ac.uk
James Seaton
is a research fellow at Cass Business School, City University in London, U.K.
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  • For correspondence: james.seaton.1@city.ac.uk
Stephen H Thomas
is a professor of finance at Cass Business School, City University in London, U.K.
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  • For correspondence: stephen.thomas.1@city.ac.uk
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Abstract

This article investigates the relationship that exists between dividend yield and momentum strategies. Both have been shown to explain the cross-section of returns, and yet they are negatively related to each other. The article finds that the outperformance of zero dividend stocks disappears when returns are measured on a value-weighted basis. Both value and momentum strategies work when the other is controlled for, although momentum is found to be the more statistically significant effect. Momentum seems to be most effective in lower dividend yield quintiles. When 130/30 portfolios were formed, this generated several percentage points of return on an annualized basis, although there was a broadly commensurate increase in volatility.

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Dividends and Momentum
Owain ap Gwilym, Andrew D Clare, James Seaton, Stephen H Thomas
The Journal of Investing May 2009, 18 (2) 42-49; DOI: 10.3905/JOI.2009.18.2.042

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Dividends and Momentum
Owain ap Gwilym, Andrew D Clare, James Seaton, Stephen H Thomas
The Journal of Investing May 2009, 18 (2) 42-49; DOI: 10.3905/JOI.2009.18.2.042
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