Market states, expectations, sentiment and momentum: How naive are investors?

Emilios C. Galariotis (), Phil Holmes (), Vasileios Kallinterakis () and Xiaodong S. Ma ()
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Emilios C. Galariotis: Audencia Recherche - Audencia Business School
Phil Holmes: University of Leeds
Vasileios Kallinterakis: University of Liverpool
Xiaodong S. Ma: WBS - Warwick Business School - University of Warwick [Coventry]

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Abstract: Following Cooper et al. (CGH) 2004 we test whether market states are relevant for predicting UK momentum profits. However, rather than simply categorising up/down markets based on actual prices as CGH, we suggest that investors may view expectations and/or sentiment as important. Contrary to the findings for the US, we find that momentum returns are not related to CGH-defined market states. Similar findings hold for an expectations-based split. In contrast, for the whole sample period, construction and retail sentiment indicators explain differences in momentum profits. However, robustness tests suggest that their explanatory power is driven by the post-subprime crisis period.

Keywords: Momentum; Futures; Expectations; Sentiment; Market states (search for similar items in EconPapers)
Date: 2014
Note: View the original document on HAL open archive server: https://audencia.hal.science/hal-00943345v1
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Published in International Review of Financial Analysis, 2014, 32, pp.1-12. ⟨10.1016/j.irfa.2013.12.004⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00943345

DOI: 10.1016/j.irfa.2013.12.004

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