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Jurnal

Journal of Financial Economics

Keyword

Asset pricing; Momentum; Information percolation; Equilibrium

Pengarang

  1. Daniel Andrei
  2. Julien Cujean

    Subject

    1. ECONOMIC
    2. FINANCIAL

      [Abstrak]

      We
      propose a joint theory of time-series momentum and reversal based on a
      rational-expectations model. We show that a necessary condition for
      momentum to arise in this framework is that information flows at an
      increasing rate. We focus on word-of-mouth communication as a mechanism
      that enforces this condition and generates short-term momentum and
      long-term reversal. Investors with heterogeneous trading
      strategies—contrarian and momentum traders—coexist in the marketplace.
      Although a significant proportion of investors are momentum traders,
      momentum is not completely eliminated. Word-of-mouth communication
      spreads rumors and generates price run-ups and reversals. Our
      theoretical predictions are in line with empirical findings.


      Periode

      Vol 123, Nomor 3, Tahun 2017

      [Berkas]

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