Nominal price illusion, return skewness, and momentum

Yuecheng Jia, Zheng Xu, Shu Yan and Runyu Zhang

Finance Research Letters, 2024, vol. 67, issue PB

Abstract: We document a significantly negative association between the nominal price measure of Birru and Wang (2015) and the profit of the stock momentum strategy. The negative relationship is driven by the underperformance of loser stocks with high nominal price illusions. Further analysis shows that the previously documented positive correlations between return skewness measures and momentum profit are subsumed by the effect of nominal price on momentum profit.

Keywords: Nominal price illusion; Return skewness; Momentum (search for similar items in EconPapers)
JEL-codes: G12 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:67:y:2024:i:pb:s1544612324009292

DOI: 10.1016/j.frl.2024.105899

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