Abstract
A commonly held view is that short-term momentum and long-term reversals in returns are an integrated process [e.g., Barberis, N., Shleifer, A., & Vishny, R. (1998). A model of investor sentiment. Journal of Financial Economics, 49, 307–343; Daniel, K., Hirshleifer, D., & Subrahmanyam, A. (1998). Investor psychology and security market under- and over-reaction. Journal of Finance, 53, 1839–1886; Hong, H., & Stein, J. C. (1999). A unified theory of underreaction, momentum trading, and overreaction in asset markets. Journal of Finance, 54, 2143–2184]. Recently, George and Hwang [George, T. J., & Hwang, C. (2004). The 52-week high and momentum investing. Journal of Finance, 59, 2145–2176] strikingly find that momentum and reversals are largely separate phenomena. Due to the critical importance of this finding to theoretical asset pricing and practical investment decisions, we examine this issue in international stock markets. Differently from George and Hwang (2004), we find that their conclusions may be open to question because momentum and reversals co-exist in the international stock indexes.
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