Drawing on neuroscience and cognitive psychology, we present a new view of momentum, highlighting how clear trends in prediction shape future expectations. We show a clear price trend significantly enhances the momentum strategy, yielding annualized returns of 12.68% in the highest trend clarity quintile, compared to 6.90% in the traditional momentum strategy. We demonstrate how trend clarity influences momentum trading intensity within the multi-period return chasing model of Hong and Stein (1999). A series of tests shows that chasing a clear price trend is an intrinsic aspect of momentum, distinct from existing explanations and present in the global markets. (the video: audio by NotebookLM and picture by DALL-E)
I am currently a Professor of Finance at the University of Liverpool.
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The pictures used in the following categories are from Kevinkeasey.com a great friend and mentor of mine.