Momentum profits following bull and bear markets

Antonios Siganos; Patricia L. Chelley-Steeley

doi:10.1057/palgrave.jam.2240188

Momentum profits following bull and bear markets

Antonios Siganos, Patricia L. Chelley-Steeley

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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 language	English
Pages (from-to)	381-388
Number of pages	8
Journal	Journal of Asset Management
Volume	6
Issue number	5
DOIs	https://doi.org/10.1057/palgrave.jam.2240188
Publication status	Published - Jan 2006

Keywords

market efficiency
momentum effect
bull and bear markets
behavioural finance

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10.1057/palgrave.jam.2240188

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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).",

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Momentum profits following bull and bear markets

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Keywords

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