Persistency of the Momentum Effect

37 Pages Posted: 16 Nov 2018

See all articles by Hong-Yi Chen

Hong-Yi Chen

National Chengchi University - Department of Finance

Pin-Huang Chou

National Central University

Chia-Hsun Hsieh

National Central University

Multiple version iconThere are 2 versions of this paper

Date Written: November 2018

Abstract

The intermediate‐term momentum persistency is not universal among all stocks. More than 40% of winners and losers immediately fall out of their respective groups in the month following formation, resulting in a monthly loss of more than 17% for a momentum strategy constructed on such stocks. By contrast, persistent winners and losers, defined as those staying in their groups for at least one more month, exhibit much stronger momentum persistency. Further analysis indicates that, consistent with the delayed reaction hypothesis for price momentum, the persistency is stronger for stocks with greater information asymmetry and more extensively heterogeneous investor beliefs.

Keywords: delayed reaction hypothesis, duration, heterogeneous beliefs, information asymmetry, persistent momentum strategy

Suggested Citation

Chen, Hong-Yi and Chou, Pin-Huang and Hsieh, Chia-Hsun, Persistency of the Momentum Effect (November 2018). European Financial Management, Vol. 24, Issue 5, pp. 856-892, 2018, Available at SSRN: https://ssrn.com/abstract=3285365 or http://dx.doi.org/10.1111/eufm.12140

Hong-Yi Chen (Contact Author)

National Chengchi University - Department of Finance ( email )

No. 64, Chih-Nan Road
Section 2
Wenshan, Taipei, 11623
Taiwan

Pin-Huang Chou

National Central University ( email )

Department of Finance
Taoyuan, 32001
Taiwan
886-3-4227151 ext 66270 (Phone)
886-3-4252961 (Fax)

HOME PAGE: http://mgt.ncu.edu.tw/~choup

Chia-Hsun Hsieh

National Central University ( email )

No. 300, Zhongda Road
Chung-Li Taiwan, 32054
Taiwan

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