Investor myopia and the momentum premium across international equity markets

Paul Docherty, Gareth Hurst

Research output: Contribution to journalArticleResearchpeer-review

2 Citations (Scopus)

Abstract

Myopic investors focus on short-run price changes rather than long-term fundamental value, resulting in an overweighting of public information and a slow diffusion of fundamental news. Such processing of information can produce price drifts similar to those seen in behavioral models of momentum. We explore the impact of myopia over an international sample, finding that momentum is stronger in more myopic countries, and this relationship is magnified where the proportion of funds under delegated management is high. We therefore argue that investor myopia, which arises due to agency issues in delegated funds management, is an important determinant of momentum.

Original languageEnglish
Pages (from-to)2465-2490
Number of pages26
JournalJournal of Financial and Quantitative Analysis
Volume53
Issue number6
DOIs
Publication statusPublished - Dec 2018

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