Evidence to the Contrary: Weekly Returns Have Momentum

Reversal is the current stylized fact of weekly returns. To the contrary, we find a robust and dominant momentum in one-week returns. The brief reversal that follows extreme weekly returns is itself followed by an opposing stream of continuation in returns. These subsequent momentum profits are strong enough to offset the initial reversal and to produce a significant momentum effect over the full year following portfolio formation. Thus, ex post, extreme weekly returns are not too extreme. Our findings extend to weekly price movements with and without public news. In addition, there is no relation between the uncertainty of news and the momentum in one-week returns.