This paper investigates the role of price reversal in momentum strategies. We hypothesize that the momentum strategies implemented in the early stage of price reversal (MSES) are more profitable than those implemented in the late stage of price reversal (MSLS). Our empirical results show that while MSES records significant positive returns, the profits from MSLS are not significant. There is a continuation of momentum profits in MSES, but a reversal in MSLS. Regression analysis shows that returns in MSES can be captured by the book-to-market factor in the Fama and French three-factor model.
JEL classification: G 11; G14
Keywords: Price reversal, Momentum strategies
Permanent URL for this record: https://lbezone.hkust.edu.hk/bib/b839594
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