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Implications from Biased Probability Judgments for International Disparities in Momentum Returns

Momentum is a consistent phenomenon in financial data from the majority of markets around the globe. One prominent exception is the Japanese market, where returns from a momentum-investment strategy are nonexistent. The authors investigated international differences in the representativeness heurist...

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Published in:The journal of behavioral finance 2017-04, Vol.18 (2), p.143-151
Main Authors: Duttle, Kai, Inukai, Keigo
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Language:English
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description Momentum is a consistent phenomenon in financial data from the majority of markets around the globe. One prominent exception is the Japanese market, where returns from a momentum-investment strategy are nonexistent. The authors investigated international differences in the representativeness heuristic, which is one potential driver of momentum. After observing sequences of a random walk, subjects give probability estimates for the direction of the respective next change. The experiment was conducted in Japan and in Germany. For a subgroup of participants with lower cognitive abilities our results are perfectly in line with international momentum evidence.
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source EBSCOhost Business Source Ultimate; EBSCOhost Econlit with Full Text; Taylor and Francis Social Sciences and Humanities Collection
subjects Cognitive reflection test
Culture
Japan
Law of small numbers
Momentum
title Implications from Biased Probability Judgments for International Disparities in Momentum Returns
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