Momentum profits following bull and bear markets

Antonios Siganos () and Patricia Chelley-Steeley
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Antonios Siganos: Department of Accounting and Finance

Journal of Asset Management, 2006, vol. 6, issue 5, No 5, 388 pages

Abstract: Abstract This paper examines the profitability that the widely published momentum strategy achieves following bull and bear markets. Investors can gain stronger momentum profits by adopting the continuation strategy after poor lagged market returns. The longer the duration used to describe the bear state, the stronger the momentum returns that are realised. The results contradict the theoretical findings of the investors' overconfidence model of Daniel et al. (‘Investor Psychology and Security Market Under- and Over-Reactions’, Journal of Finance, 53, 1839–85, 1998) and the follow-the-trend model of Kim (‘Long-term Momentum Hypothesis: Contrarian and Momentum Strategies’, Working Paper, 2002), but concur with the theoretical results of the traders' hesitation model of Du (‘Heterogeneity in Investor Confidence and Asset Market Under- and Overreaction’, Working Paper, 2002).

Keywords: market efficiency; momentum effect; bull and bear markets; behavioural finance (search for similar items in EconPapers)
Date: 2006
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DOI: 10.1057/palgrave.jam.2240188

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