Short-term Predictability on the International Capital Markets – Momentum Effect

Bozhidar Nedev ()

Ikonomiceski i Sotsialni Alternativi, 2018, issue 2, 121-135

Abstract: This paper systematizes the research achievements, related to the short-term return predictability of stocks or the so-called momentum effect as identified by Jegadeesh and Titman (1993). It turned out to be one of the strongest evidences against the Efficient Market Hypothesis. Despite its popularity in the investment and academic community momentum effect does not disappear. Momentum investment strategies continue to be profitable except in times of high market volatility. Momentum effect is also profitable on the most of the international stock markets. It is difficult to develop a rational explanation of the presence of momentum effect according to the academic community. That is why, researchers turn to behavioural finance. Although these models do not reveal an unambiguous answer for the driver of the phenomenon, they succeed in interpreting it more comprehensively than conventional economic theory.

Keywords: momentum effect; behavioural finance; rational economic theory; stock exchanges; investment strategies (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 G15 G17 G41 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:nwe:iisabg:y:2018:i:2:p:121-135

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