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Momentum and Reversal Puzzle in Emerging Markets

19 Pages Posted: 4 Mar 2005 Last revised: 24 Mar 2008

Jose Renato Haas Ornelas

Banco Central do Brasil

Jose L. B. Fernandes

Universidade de Brasília

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Abstract

Empirical research about the existence of momentum in Emerging Stock Markets shows that profits are in general positive but not always economically and statistically significant. This paper re-examines the momentum phenomenon in 15 emerging markets, using data from 1995 to 2005. Our results are strongly different from previous literature: we found no evidence of momentum and a significant evidence of reversals in most of the markets analysed, even when controlled for systematic risk and size. This is probably due to a faster diffusion and a huge amount of information available in recent years, which are leading to overconfidence and overreaction.

Keywords: Emerging Markets, Reversal, Momentum

JEL Classification: G14, G15

Suggested Citation

Ornelas, Jose Renato Haas and Fernandes, Jose L. B., Momentum and Reversal Puzzle in Emerging Markets. Available at SSRN: https://ssrn.com/abstract=676392 or http://dx.doi.org/10.2139/ssrn.676392

Jose Renato Haas Ornelas (Contact Author)

Banco Central do Brasil ( email )

P.O. Box 08670
SBS Quadra 3 Bloco B - Edificio-Sede
Brasilia, Distrito Federal 70074-900
Brazil

HOME PAGE: http://www.bcb.gov.br

Jose Luiz Barros Fernandes

Universidade de Brasília ( email )

Campus Universitário Darcy Ribeiro
Brasília, Distrito Federal 70910-900
Brazil

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