The more you look at the momentum effect, the more interesting it becomes. It is easy to dismiss momentum as simply investors following past winners and herding them into the same kind of stocks. And investor herding is definitely a big part of the story, but by looking at the momentum effect in more detail, you can find out a lot about financial markets and human nature.
1/ Perhaps I misremember, but I recall that you wrote earlier about research showing that sector momentum is caused by flows and price moves in individual stocks are caused by HF analysts spotting mispricing.
2/ Robert Armstrong (in today‘s FT) points to research showing that trading volumes matter: high-volume stocks exhibit short term momentum and low-volume stocks show short term reversals.
Based on this, am I better off buying stocks at the open?
Thanks for this, Joachim. Three related thoughts:
1/ Perhaps I misremember, but I recall that you wrote earlier about research showing that sector momentum is caused by flows and price moves in individual stocks are caused by HF analysts spotting mispricing.
2/ Robert Armstrong (in today‘s FT) points to research showing that trading volumes matter: high-volume stocks exhibit short term momentum and low-volume stocks show short term reversals.
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3150525
3/ Another paper via Armstrong: value is mean reverting, growth trends
https://verdadcap.com/archive/trend-following-in-growth-and-value