Are Momentum Traders Different? Implications for the Momentum Puzzle
AbstractThis paper examines the puzzlingly high unexploited momentum returns from a new perspective. We analyze characteristics of momentum traders in a sample of 692 fund managers. We find that momentum traders are "defined" by their short-term horizon, by a behavioural view on the market and by a somewhat lower degree of risk aversion, whereas they are like other fund managers with respect to sophistication. This is consistent with the interpretation that momentum returns may compensate for the risk of momentum trading on short-term horizons and that the short-term oriented momentum traders are not in a position to perform long-term arbitrage.
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Bibliographic InfoPaper provided by Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät in its series Hannover Economic Papers (HEP) with number dp-448.
Length: 27 pages
Date of creation: May 2010
Date of revision:
momentum trading; market efficiency; behavioural finance; risk;
Other versions of this item:
- Lukas Menkhoff, 2011. "Are momentum traders different? Implications for the momentum puzzle," Applied Economics, Taylor & Francis Journals, vol. 43(29), pages 4415-4430.
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
- D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
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