Long-Term Momentum Hypothesis: Contrarian and Momentum Strategies
54 Pages Posted: 6 Sep 2002
Date Written: July 2002
Abstract
This paper suggests a new model that attempts to explain long-term reversal and short-term momentum in stock prices by the interaction of momentum traders and passive rational investors. The new model is distinct from other overreaction models in that price momentum becomes stronger as a trend in stock price changes continues. The simulation results for the model confirm long-term reversal and short-term momentum and propose three new predictions that distinguish the model from other hypotheses. These predictions are synthetically described as the long-term momentum hypothesis. The primary empirical results provided by this study are consistent with the long-term momentum hypothesis.
Keywords: behavioral finance, long-term reversal, momentum
JEL Classification: G12, G14
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
By Nicholas Barberis, Andrei Shleifer, ...
-
A Unified Theory of Underreaction, Momentum Trading and Overreaction in Asset Markets
By Harrison G. Hong and Jeremy C. Stein
-
By Louis K.c. Chan, Narasimhan Jegadeesh, ...
-
Bad News Travels Slowly: Size, Analyst Coverage and the Profitability of Momentum Strategies
By Harrison G. Hong, Terence Lim, ...
-
Profitability of Momentum Strategies: An Evaluation of Alternative Explanations
-
Profitability of Momentum Strategies: an Evaluation of Alternative Explanations
-
When are Contrarian Profits Due to Stock Market Overreaction?
By Andrew W. Lo and A. Craig Mackinlay