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AbstractAlthough price trends such as momentum and reversal patterns of stock prices are well established in the literature, little is known whether price patterns still hold at the international level. Using data from over 24,000 stock prices, the analysis forms international within and across industries portfolios for the EU and the Asia/Pacific regions and studies the presence of momentum and reversal patterns, compared with the typical benchmark, which is the U.S. market. Interestingly, it finds that both patterns are related to low capitalized firms. Price reversals appearing only at the short-run validating the liquidity constraint assumption, while momentum holds for a longer period and is related to investors’ underreaction. Finally, it finds that only a few sectors can predict the market as an indirect result of momentum. A trading strategy that builds on industries’ portfolios own predictive ability beats the market. Overall, matching returns patterns from the national to the international level supports the presence of unobserved risk factors and behavioral biases.
CitationApergis, N., Plakandaras, V., and Pragidis, I. (2020). 'Industry momentum and reversals in stock markets'. International Journal of Finance and Economics, pp. 1-7.
JournalInternational Journal of Finance and Economics
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