Trend salience, investor behaviours and momentum profitability

Subject Areas : Journal of Investment Knowledge

parvaneh khaleghi kasbi ¹ , MohammadAli Aghaei ²

1 - PhD student, Department of Accounting, Qazvin Branch, Islamic Azad University, Qazvin, Iran.
2 - Associate Professor, Department of Accounting, Tarbiat Modares University, Tehran, Iran.

Received: 2019-02-05 Accepted : 2019-04-29 Published : 2021-09-23

Keywords: Market states, Trend salience, Momentum, overreact,

Abstract :

Based on Momentum investing strategy and unlike labour market hypothesis, achieving a higher profitability comparing to the profitability of the market is possible. Momentum profitability is the resultant of behavioral bias of investors in the market. Based on behavioral models investors allocate a more possibility to trend saliences and they use trends which are effective in the future stuck price predictions. It is proved in this essay that the limitation on which the investor estimates past trends is dependent on the salience of that trend.To test the hypotheses, a multivariate regression model has been used and the selected sample includes companies accepted in Tehran Stock Exchange between 2012 and 2016. The results of the research showed that investors are sensitive to the value of the price signal during the formation period and are likely to estimate stocks with an increasing trend. For this reason, it can be argued that the salience momentum strategy acts better than the non- salience momentum strategy.

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