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Behavioral biases in investment strategies: evaluating mean reversion and momentum through overreaction and underreaction
| Nome: | Descrição: | Tamanho: | Formato: | |
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| 2.51 MB | Adobe PDF |
Autores
Orientador(es)
Resumo(s)
I test the two most well-known behavioral patterns of investors—underreaction and
overreaction—by creating 12 long-term Mean Reversion strategies based on investors'
overreaction and 12 short-term Momentum strategies based on investors' underreaction.
Among the 24 strategies tested, the Mean Reversion strategies proved unsuccessful, mainly
due to the profitability and investment factors in the losers’ portfolios, while the Momentum
strategies remained highly effective, primarily due to the momentum factor. Therefore, the
theory of investor overreaction is questioned, while the theory of investor underreaction is
strengthened. It is suggested that combining both strategies could lead to higher returns.
Descrição
Palavras-chave
Behavioral finance Investor overreaction Investor underreaction Investment strategies Mean reversion Momentum