Momentum, Information, and Herding

Zhilu Lin, Wentao Wu and Haoran Zhang

Journal of Behavioral Finance, 2023, vol. 24, issue 2, 219-237

Abstract: This study investigates the potential explanations to the momentum effect on the equity market. We primarily discuss the underreaction hypothesis, the overreaction hypothesis, and the impact of herding behavior. We find that the momentum effect disappeared after decimalization in all size deciles, which does not support the underreaction hypothesis. We also find that momentum profits do not exist in any intangible assets or R&D expenses deciles, which is not consistent with the continuous overreaction hypothesis. We further investigate the impact of herding behavior on the momentum effect. Using a new firm-level herding measurement, we find that investors require higher returns in high herding stocks and they require even higher returns in high herding stocks among previous losers, indicating that investors herd against the previous losers while they herd toward the winners.

Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/15427560.2021.1971983 (text/html)
Access to full text is restricted to subscribers.

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:taf:hbhfxx:v:24:y:2023:i:2:p:219-237

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/hbhf20

DOI: 10.1080/15427560.2021.1971983

Access Statistics for this article

Journal of Behavioral Finance is currently edited by Brian Bruce

More articles in Journal of Behavioral Finance from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().