Market confidence and momentum
We develop a model in which equity fundamentals are subject to random shocks. Investors learn about the shocks through noisy information. The model shows that momentum is more pronounced in a more confident market. We conduct tests of the prediction and find supportive evidence. Specifically, we find that market volatility negatively predicts momentum profits. This evidence supports the prediction since a more volatile market is likely to be less confident. The model also predicts that idiosyncratic shocks, not systematic shocks, produce momentum. This is consistent with empirical findings from a number of studies.
Kevin Q. Wang Jianguo Xu
国际会议
广州
英文
1-33
2009-07-07（万方平台首次上网日期，不代表论文的发表时间）