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Capital investment and momentum strategies

Capital investment and momentum strategies The main purpose of this paper is to investigate whether capital investment can affect stock price momentum. We provide empirical evidence that momentum strategies tend to be more profitable for stocks with large capital investment or investment changes. We present a simple explanation for our empirical results and show that our finding is consistent with the behavioral finance theory that characterizes investors’ increased psychological bias and the more limited arbitrage opportunity when the estimation of firm value becomes more difficult or less accurate. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

Capital investment and momentum strategies

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References (35)

Publisher
Springer Journals
Copyright
Copyright © 2011 by Springer Science+Business Media, LLC
Subject
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
DOI
10.1007/s11156-011-0250-3
Publisher site
See Article on Publisher Site

Abstract

The main purpose of this paper is to investigate whether capital investment can affect stock price momentum. We provide empirical evidence that momentum strategies tend to be more profitable for stocks with large capital investment or investment changes. We present a simple explanation for our empirical results and show that our finding is consistent with the behavioral finance theory that characterizes investors’ increased psychological bias and the more limited arbitrage opportunity when the estimation of firm value becomes more difficult or less accurate.

Journal

Review of Quantitative Finance and AccountingSpringer Journals

Published: Aug 27, 2011

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