Rational momentum effects
Subject
Finance
Publishing details
IFA Working Paper
Publication Year
2000
Abstract
Momentum effects in stock returns need not imply investor irrationality, heterogeneous information, or market frictions. A simple, single-firm model with a standard pricing kernel can produce such effects when dividend growth rates vary over time. An enhanced model, under which persistent growth rate shocks occurs episodically, can match many of the features documented by the empirical research. The same basic mechanism could potentially account for underreaction anomalies in general.
Publication Research Centre
Institute of Finance and Accounting
Series Number
FIN 318
Series
IFA Working Paper
Available on ECCH
No
