Abstract
This paper investigates how anchoring-induced investors’ trading behavior drives momentum anomaly. The results show that price momentum does not retain its ability to predict future returns after considering the stock’s nearness to its 52-week high. The stock price’s nearness to the 52-week high is a stronger return predictor for stocks with a higher retail trading proportion. This suggests an anchoring-induced momentum pattern, which is affected by investor heterogeneity. Our trading flow analysis reveals that retail investors are subject to anchoring bias. Their trading behavior causes price underreaction to good (bad) information for stocks traded near (far from) their 52-week high.
Published Version
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
