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Momentum profits following bull and bear markets

Author

Listed:
  • Antonios Siganos

    (Department of Accounting and Finance)

  • Patricia Chelley-Steeley

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).

Suggested Citation

  • Antonios Siganos & Patricia Chelley-Steeley, 2006. "Momentum profits following bull and bear markets," Journal of Asset Management, Palgrave Macmillan, vol. 6(5), pages 381-388, January.
    • Handle: RePEc:pal:assmgt:v:6:y:2006:i:5:d:10.1057_palgrave.jam.2240188
    DOI: 10.1057/palgrave.jam.2240188
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    Citations

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    Cited by:

    1. Antonios Siganos, 2010. "Can small investors exploit the momentum effect?," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 24(2), pages 171-192, June.
    2. Greg Filbeck & Xin Zhao & Ryan Knoll, 2017. "An analysis of working capital efficiency and shareholder return," Review of Quantitative Finance and Accounting, Springer, vol. 48(1), pages 265-288, January.
    3. Wouassom, Alain & Muradoğlu, Yaz Gülnur & Tsitsianis, Nicholas, 2022. "Global momentum: The optimal trading approach," Journal of Behavioral and Experimental Finance, Elsevier, vol. 36(C).
    4. Hung, Weifeng & Lin, Ching-Ting & Yang, J. Jimmy, 2022. "Aggregate 52-week high, limited attention, and time-varying momentum profits," Journal of Banking & Finance, Elsevier, vol. 141(C).
    5. Ivelina Pavlova & A. M. Parhizgari, 2011. "In search of momentum profits: are they illusory?," Applied Financial Economics, Taylor & Francis Journals, vol. 21(21), pages 1617-1639.

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