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Event Registration |
| 18 Mar 2010 |
5:30 PM |
7:30 PM |
Credit Suisse Training Center
11 Madison Avenue
New York, NY 10010-3643
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Registration has ended. |
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The Implication of Investor Attention for Price and Earnings Momentum
Lin Peng [bio]
Baruch College
Can measures of investor attention be used to improve the stock selection performance of earnings momentum and price momentum factors? According to new research, the answer is yes!
The SQA chose this paper because it provides important insights into the significant impact investor attention (as measured by trading volume) has on the success of earnings and price momentum factors as predictors of individual stock returns. Lin Peng and her co-authors present strong evidence that investor attention leads to profit from both earnings momentum and price momentum, but in opposite ways. They show, in the case of earnings momentum, stocks with low trading volume (low attention) exhibit investor under-reaction to earnings announcements and this results in stronger subsequent stock returns. In the case of price momentum, stocks with high trading volume (high attention) exhibit investor over-reaction to stock-specific news and this results in stronger subsequent stock returns. The authors also show that market direction impacts the two factors differently. Earnings momentum works best in down markets and returns are persistent. Price momentum works best in up markets and returns are not as persistent.
Abstract: We examine the role of investor attention in explaining the profitability of price and earnings momentum strategies. Using trading volume and market state to measure cross-sectional and time-series variations of investor attention, we find that price momentum profits are higher among high volume stocks and in up markets, but that earnings momentum profits are higher among low volume stocks and in down markets. In the long run, price momentum profits reverse but earnings momemtum profits do not. These results suggest that price underraction to earnings news weakens with investor attention, but price continuation caused by investors' overreaction strengthens with attention.
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March 18, 2010
5:30pm Registration & cocktails; 6:00pm Program
Cost: $40 SQA Member; $20 Transitional Member; $80 Non member; $20 Graduate Student
Registration Deadline: Monday, March 15st
Location: Credit-Suisse Training Center, 11 Madison Ave at East 24th St, NYC
Please Note: Pick up your badge at the security desk located to the left-back of the lobby when entering the building. Advance registrants will be pre-approved and will be able to proceed to the lower-level meeting room more quickly.
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