Aging Population and its Effects on Long-Horizon Momentum Profits

King Fuei Lee

MPRA Paper from University Library of Munich, Germany

Abstract: The momentum effect is postulated to be a consequence of the disposition effect, which in turn, is a result of the interplay between the typically dominant diminishing sensitivity feature of prospect theory and the loss aversion feature. However, studies have shown that older individuals can exhibit a reverse disposition effect due to their heightened loss aversion compared to younger individuals. This paper hypothesises that as the population ages, the disposition effect of the average investor starts to diminish, thereby inducing a corresponding weakening of the momentum effect. We find empirical evidence showing that the long-horizon momentum profits are negatively related to changes in the proportion of the older population.

Keywords: Momentum; demographics; prospect theory; loss aversion; diminishing sensitivity; aging population; disposition effect (search for similar items in EconPapers)
JEL-codes: G12 J14 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-age, nep-mac and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/120931/1/MPRA_paper_120931.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/121511/8/Upload%20Momentum%20Demographics.pdf revised version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:120931

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().