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The impact of elasticity on disposition effect driven momentum, substitutability, size, and January seasonality

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  • Jared Egginton

    (Boise State University)

  • Jungshik Hur

    (Louisiana Tech University)

  • Vivek Singh

    (University of Michigan, Dearborn)

Abstract

We find that momentum caused by disposition effect is mainly driven by stocks with unrealized capital gains and it is greater when price elasticity of demand is low. We further find that the size effect on momentum and January seasonality in momentum disappear when price elasticity of demand is low. In addition, the price elasticity of demand for stocks is related to the phase of business cycle and degree of product substitutability. Our findings are robust to other factors and the effect of market states on momentum profits.

Suggested Citation

  • Jared Egginton & Jungshik Hur & Vivek Singh, 2019. "The impact of elasticity on disposition effect driven momentum, substitutability, size, and January seasonality," Review of Quantitative Finance and Accounting, Springer, vol. 52(3), pages 759-780, April.
    • Handle: RePEc:kap:rqfnac:v:52:y:2019:i:3:d:10.1007_s11156-018-0725-6
    DOI: 10.1007/s11156-018-0725-6
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    1. Mohamed S. Ahmed & John A. Doukas, 2021. "Revisiting disposition effect and momentum: a quantile regression perspective," Review of Quantitative Finance and Accounting, Springer, vol. 56(3), pages 1087-1128, April.

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    More about this item

    Keywords

    Momentum; Disposition effect; Elasticity; Substitutability; January seasonality;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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