Distinguishing Behavioral Models of Momentum
48 Pages Posted: 3 Oct 2008 Last revised: 19 Aug 2010
Date Written: July 28, 2010
This paper compares the extent to which different irrational behavior patterns explain the momentum effect. I find that price momentum increase in the average correlation of analysts’ forecast errors. I argue that these results provide evidence that the momentum effect may be better understood within a framework built on overconfidence about correlated signals than one built on limited attention and gradual information flow.
Keywords: Price Momentum, Behavioral Asset Pricing Models
JEL Classification: G12, G14
Suggested Citation: Suggested Citation