Information percolation, momentum and reversal

• 成果类型: Article
• 署名作者: Andrei, Daniel; Cujean, Julien
• 署名单位: University of California System; University of California Los Angeles; University System of Maryland; University of Maryland College Park
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2016.05.012
• 发表日期: 2017
• 页码: 617-645
• 关键词: Asset pricing; momentum; information percolation; equilibrium

摘要

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-ofmouth communication as a mechanism that enforces this condition and generates shortterm 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. (C) 2016 Elsevier B.V. All rights reserved.