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Asymmetric momentum effects under uncertainty
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Kelsey, David, Professor, Kozhan, Roman and Pang, Wei. (2011) Asymmetric momentum effects under uncertainty. Review of Finance, Vol.15 (No.3). pp. 603-631. ISSN 1572-3097
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Official URL: http://dx.doi.org/10.1093/rof/rfq021
Abstract
This paper studies asymmetric profitability of the momentum trading strategy. When investors face Knightian uncertainty, they react differently to past winners and losers, which creates asymmetric patterns in price continuations. This asymmetry increases with the level of market and idiosyncratic uncertainty relating to the fundamental value of stocks. We provide a model explaining this phenomenon and empirical evidence supporting the hypothesis. Our results also imply that momentum is more likely to continue for downward trends in a highly uncertain market.
| Item Type: | Journal Article |
|---|---|
| Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HG Finance Q Science > QA Mathematics |
| Divisions: | Faculty of Social Sciences > Warwick Business School > Finance Group Faculty of Social Sciences > Warwick Business School |
| Library of Congress Subject Headings (LCSH): | Capital market, Stocks, Speculation -- Psychological aspects, Uncertainty, Investments -- Psychological aspects, Time-series analysis |
| Journal or Publication Title: | Review of Finance |
| Publisher: | Oxford University Press |
| ISSN: | 1572-3097 |
| Date: | July 2011 |
| Volume: | Vol.15 |
| Number: | No.3 |
| Number of Pages: | 29 |
| Page Range: | pp. 603-631 |
| Identification Number: | 10.1093/rof/rfq021 |
| Status: | Peer Reviewed |
| Publication Status: | Published |
| Access rights to Published version: | Restricted or Subscription Access |
| Funder: | Sixth Framework Programme (European Commission) (FP6) |
| Grant number: | 516446 (FP6) |
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| URI: | http://wrap.warwick.ac.uk/id/eprint/38582 |
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