City Research Online

Abstract

We document a striking pattern in U.S. and international stock returns: double sorting on the previous month’s return and share turnover reveals significant short-term reversal among low-turnover stocks, whereas high-turnover stocks exhibit short-term momentum. Short-term momentum is as profitable and as persistent as conventional price momentum. It survives transaction costs and is strongest among the largest, most liquid, and most extensively covered stocks. Our results are difficult to reconcile with models imposing strict rationality but are suggestive of an explanation based on some traders underappreciating the information conveyed by prices.

Publication Type:	Article
Additional Information:	This is a pre-copyedited, author-produced version of an article accepted for publication in The Review of Financial Studies following peer review. The version of record Mamdouh Medhat, Maik Schmeling, Short-term Momentum, The Review of Financial Studies, Volume 35, Issue 3, March 2022, Pages 1480–1526, is available online at: https://doi.org/10.1093/rfs/hhab055.
Publisher Keywords:	Asset Pricing, Trading volume; Bond Interest RatesG14 - Information and Market Efficiency; Event Studies; Insider Trading
Subjects:	H Social Sciences > HG Finance
Departments:	Bayes Business School > Finance
SWORD Depositor:	Symplectic Administrator

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