Short-term Momentum

Maik Schmeling and Mamdouh Medhat

No 15857, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We document a striking pattern in U.S. and international stock returns: Double sorting on last month's return and share turnover reveals significant short-term reversal among low-turnover stocks whereas high-turnover stocks exhibit short-term momentum. Short-term momentum is as profitable and as persistent as conventional price momentum. It also survives transaction costs and is strongest among the largest, most liquid, and most extensively covered stocks. Our results are difficult to reconcile with models imposing strict rationality but are suggestive of an explanation based on some traders underappreciating the information in prices.

Keywords: Momentum; Reversal; Trading volume; Bounded rationality (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2021-02
New Economics Papers: this item is included in nep-cwa
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Citations: View citations in EconPapers (3)

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