Momentum profits following bull and bear markets

Antonios Siganos, Patricia L. Chelley-Steeley

Research output: Contribution to journalArticle

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).
Original languageEnglish
Pages (from-to)381-388
Number of pages8
JournalJournal of Asset Management
Volume6
Issue number5
DOIs
Publication statusPublished - Jan 2006

Fingerprint

Bear market
Investors
Momentum profits
Bull market
Underreaction
Momentum
Overreaction
Momentum strategies
Finance
Contrarian strategy
Confidence
Profitability
Asset markets
Traders
Market returns
Investor psychology
Overconfidence
Securities market

Keywords

  • market efficiency
  • momentum effect
  • bull and bear markets
  • behavioural finance

Cite this

Siganos, Antonios ; Chelley-Steeley, Patricia L. / Momentum profits following bull and bear markets. In: Journal of Asset Management. 2006 ; Vol. 6, No. 5. pp. 381-388.
@article{073a6e2d38a64312ac0c54e4045db94e,
title = "Momentum profits following bull and bear markets",
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",
author = "Antonios Siganos and Chelley-Steeley, {Patricia L.}",
year = "2006",
month = "1",
doi = "10.1057/palgrave.jam.2240188",
language = "English",
volume = "6",
pages = "381--388",
journal = "Journal of Asset Management",
issn = "1470-8272",
publisher = "Palgrave Macmillan Ltd.",
number = "5",

}

Momentum profits following bull and bear markets. / Siganos, Antonios; Chelley-Steeley, Patricia L.

In: Journal of Asset Management, Vol. 6, No. 5, 01.2006, p. 381-388.

Research output: Contribution to journalArticle

TY - JOUR

T1 - Momentum profits following bull and bear markets

AU - Siganos, Antonios

AU - Chelley-Steeley, Patricia L.

PY - 2006/1

Y1 - 2006/1

N2 - 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).

AB - 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).

KW - market efficiency

KW - momentum effect

KW - bull and bear markets

KW - behavioural finance

UR - http://www.palgrave-journals.com/jam/journal/v6/n5/abs/2240188a.html

U2 - 10.1057/palgrave.jam.2240188

DO - 10.1057/palgrave.jam.2240188

M3 - Article

VL - 6

SP - 381

EP - 388

JO - Journal of Asset Management

JF - Journal of Asset Management

SN - 1470-8272

IS - 5

ER -