Rationalizing Momentum Interactions
| dc.contributor.author | Avramov, Doron | |
| dc.contributor.author | Hore, Satadru | |
| dc.date.accessioned | 2008-01-04T19:14:45Z | |
| dc.date.available | 2008-01-04T19:14:45Z | |
| dc.date.issued | 2007 | |
| dc.description.abstract | Momentum profitability concentrates in high information uncertainty and high credit risk firms and is virtually nonexistent otherwise. This paper rationalizes such momentum interactions in equilibrium asset pricing. In our paradigm, dividend growth is mean reverting, expected dividend growth is stochastic and highly persistent, the representative agent is endowed with stochastic differential utility of Duffie and Epstein (1992), and leverage, which proxies for credit risk, is modeled based on the Abel's (1999) formulation. Using reasonable risk aversion levels we produce the observational momentum effects. In particular, momentum profitability is especially high in the interaction between high levered and risky cash flow firms. It rapidly deteriorates and ultimately disappears as leverage or cash flow risk diminishes. | en |
| dc.format.extent | 229201 bytes | |
| dc.format.mimetype | application/pdf | |
| dc.identifier.citation | Avramov, Doron, and Satadru Hore, 2007, Rationalizing Momentum Interactions. | en |
| dc.identifier.uri | http://hdl.handle.net/1903/7491 | |
| dc.language.iso | en_US | en |
| dc.relation.isAvailableAt | Robert H. Smith School of Business | en_us |
| dc.relation.isAvailableAt | Finance | en_us |
| dc.relation.isAvailableAt | Digital Repository at the University of Maryland | en_us |
| dc.relation.isAvailableAt | University of Maryland (College Park, MD) | en_us |
| dc.subject | momentum profitability | en |
| dc.subject | credit risk | en |
| dc.subject | equilibrium asset pricing | en |
| dc.title | Rationalizing Momentum Interactions | en |
| dc.type | Working Paper | en |