Return signal momentum

Broad-Market Return Persistence & Momentum Profits

Momentum profits are shown to be driven by the broad-market persistence of returns between the formation period and the holding period, which is measured as the slope coefficient of the regression of the cross-section returns in the holding period on the cross-section returns in the formation period. Broad-market persistence offers an understanding on momentum profits from a market-wide perspec...

Stock Return Momentum and Investor Fund Choice

Does Stock Return Momentum Explain the “Smart Money” Effect?

Does the “smart money” effect documented by Gruber (1996) and Zheng (1999) reflect fund selection ability of mutual fund investors? We examine the finding that investors are able to predict mutual fund performance and invest accordingly. We show that the smart money effect is explained by the stock return momentum phenomenon documented by Jegadeesh and Titman (1993). Further evidence suggests t...

JOB MARKET PAPER The Momentum Gap and Return Predictability∗

Momentum strategies have historically delivered high Sharpe ratios and large positive alphas. However, returns to these strategies also display significant time-variation that is not very well understood. I show that expected momentum returns vary negatively and monotonically with the formation period return difference between past winners and losers, which I term the momentum gap. A one standa...

Overconfidence, Perceived Signal Dependency and Momentum

Perceived signal dependencies can be induced by behavioural biases such as clustering illusion, ambiguity aversion or confirmatory bias. The resultant dependencies will lead to time series profiles of prices in markets characterised by overconfident investors that manifest the empirically documented overreaction, momentum and mean reversion effects within a simple and robust modelling structure...