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Momentum and the Disposition Effect: The Role of Individual Investors
Author(s) -
Hur Jungshik,
Pritamani Mahesh,
Sharma Vivek
Publication year - 2010
Publication title -
financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.647
H-Index - 68
eISSN - 1755-053X
pISSN - 0046-3892
DOI - 10.1111/j.1755-053x.2010.01107.x
Subject(s) - disposition effect , momentum (technical analysis) , disposition , stock (firearms) , economics , financial economics , monetary economics , sample (material) , econometrics , business , psychology , geography , social psychology , physics , context (archaeology) , thermodynamics , archaeology
We hypothesize that disposition effect‐induced momentum documented in Grinblatt and Han (2005) should be stronger in stocks with greater individual investors’ presence since individual investors are more prone to the disposition effect. We find strong evidence for our hypothesis for a large sample of NYSE/AMEX/NASDAQ stocks from the end of 1980 to 2005. Our results hold across different momentum strategies using alternative ways of defining individual investors’ presence in a stock and maintain even after controlling for variables known to drive momentum. Furthermore, we find that our results are stronger for hard‐to‐value stocks consistent with the findings of Kumar (2009).