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How do disposition effect and anchoring bias interact to impact momentum in stock returns?

Jungshik Hur and Vivek Singh

Journal of Empirical Finance, 2019, vol. 53, issue C, 238-256

Abstract: We show that when the disposition effect and anchoring bias of investors reinforce each other, the momentum profit is strengthened. When the two effects offset each other, the momentum profit decreases or disappears. Second, stocks dominated by small investors, with low analyst coverage, and illiquidity issues show greater momentum profits in presence of these mutually reinforcing biases. Third, stock return in momentum strategy show reversal in the long run when they are affected by both anchoring bias and disposition effect consistent with prior literature.

Keywords: Momentum; Disposition Effect; 52-Week High Anchoring Bias (search for similar items in EconPapers)
Date: 2019
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Journal of Empirical Finance is currently edited by R. T. Baillie, F. C. Palm, Th. J. Vermaelen and C. C. P. Wolff

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Handle: RePEc:eee:empfin:v:53:y:2019:i:c:p:238-256