Momentum Effect as Part of a Market Equilibrium Academic Article

abstract

• AbstractDoes the momentum effect arise naturally from the determination of asset prices in market equilibrium? We calibrate a standard endowment model of multiple assets under recursive preferences. The momentum effect partly comes from investors aversion to consumption risks. An unexpected dividend increase generates a positive return and increases the assets proportion of consumption, raising the correlation between its future dividend growth and consumption growth. This is compensated by a higher expected return, generating the momentum effect. The cross-sectional difference in expected returns is also a key contributor. The quantified model produces sizable momentum profits, often close to the observed profits.

authors

• Kim, Hwagyun

published proceedings

• JOURNAL OF FINANCIAL AND QUANTITATIVE ANALYSIS

altmetric score

• 1.25

author list (cited authors)

• Choi, S. M., & Kim, H.

citation count

• 11

complete list of authors

• Choi, Seung Mo||Kim, Hwagyun

publication date

• February 2014

publisher

• Cambridge University Press (CUP)  Publisher

published in

• Journal of Financial and Quantitative Analysis  Journal

keywords

• Asset Pricing
• Momentum Effect

Digital Object Identifier (DOI)

• 10.1017/S0022109014000234

start page

• 107

end page

• 130

volume

• 49

issue

• 1

URL

• http://dx.doi.org/10.1017/s0022109014000234