Abstract
Abstract Although momentum exists in many markets throughout the world, explanations for momentum have largely been tested using U.S. data. We investigate the extent to which U.S.-based momentum explanations extend to the international context, using regression-based and portfolio approaches. Amongst the several hypotheses we consider, we find reliable support for the hypothesis that because of limited attention, investors underreact to information arriving in small bits rather than in large chunks, which results in momentum. We also find secondary support for the overconfidence hypothesis for momentum. Finally, we find that momentum is stronger in up-markets and less-volatile markets in the international context just as in the U.S. This finding also accords with the investor overconfidence hypothesis, under the proviso that investors are more confident in rising, low-volatility markets.
Published Version
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