Verardo, Michela 
ORCID: 0009-0002-4241-6584
(2009)
Heterogenous beliefs and momentum profits.
Journal of Financial and Quantitative Analysis, 44 (4).
pp. 795-822.
ISSN 0022-1090
Abstract
Recent theoretical models derive return continuation in a setting where investors have heterogeneous beliefs or receive heterogeneous information. This paper tests the link between heterogeneity of beliefs and return continuation in the cross-section of U.S. stock returns. Heterogeneity of beliefs about a firm's fundamentals is measured by the dispersion in analyst forecasts of earnings. The results show that momentum profits are significantly larger for portfolios characterized by higher heterogeneity of beliefs. Predictive cross-sectional regressions show that heterogeneity of beliefs has a positive effect on return continuation after controlling for a stock's visibility, the speed of information diffusion, uncertainty about fundamentals, information precision, and volatility. The results in this paper are robust to the potential presence of short-sale constraints and are not explained by arbitrage risk.
| Item Type: | Article |
|---|---|
| Official URL: | http://depts.washington.edu/jfqa/ |
| Additional Information: | © 2009 Foster School of Business, University of Washington |
| Divisions: | Finance |
| Subjects: | H Social Sciences > HG Finance |
| Date Deposited: | 28 Nov 2009 14:55 |
| Last Modified: | 11 Dec 2024 23:27 |
| URI: | http://eprints.lse.ac.uk/id/eprint/16593 |
Actions (login required)
 |
View Item |
