A Limited Attention Theory of Time Series Momentum

32 Pages Posted: 28 Jul 2022 Last revised: 22 Sep 2023

See all articles by Aleksi Pitkäjärvi

Aleksi Pitkäjärvi

Vrije Universiteit Amsterdam; Tinbergen Institute

Date Written: November 1, 2021

Abstract

I present a model of bond and equity markets where some investors have limited attention, and show that the model generates both time series momentum and cross-asset time series momentum. The model makes several novel predictions about the performance of different time series momentum and cross-asset time series momentum strategies, and about the effects that investor attention has on strategy performance. Using bond and equity returns from twenty countries and Google search volume as a measure of investor attention, I find that the predictions are in line with the data.

Keywords: asset pricing, behavioral finance, cross-asset time series momentum, time series momentum, limited attention

JEL Classification: G12, G15, G17, G41, F37

Suggested Citation

Pitkäjärvi, Aleksi, A Limited Attention Theory of Time Series Momentum (November 1, 2021). Available at SSRN: https://ssrn.com/abstract=4168092 or http://dx.doi.org/10.2139/ssrn.4168092

Aleksi Pitkäjärvi (Contact Author)

Vrije Universiteit Amsterdam ( email )

De Boelelaan 1105
Amsterdam, 1081 HV
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

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