Noise Momentum Around the World

Cai, Charlie X ORCID: 0000-0003-1398-3715, Faff, Robert and Shin, Yongcheol (2018) Noise Momentum Around the World. ABACUS-A JOURNAL OF ACCOUNTING FINANCE AND BUSINESS STUDIES, 54 (1). pp. 79-104.

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Abstract

<jats:p>We argue that arbitrageurs will strategically limit their initial investment in an arbitrage opportunity in anticipation of further mispricing caused by the deepening of noise traders' misperceptions. Such ‘noise momentum’ is an important determinant of the overall arbitrage process. We design an empirical strategy to capture noise momentum in a two‐period generalized error correction model. Applying it to a wide range of international spot‐futures market pairs, we document pervasive evidence of noise momentum around the world.</jats:p>

Item Type:	Article
Uncontrolled Keywords:	Futures and spot prices, Initial mispricing correction, Limited arbitrage, Noise momentum
Depositing User:	Symplectic Admin
Date Deposited:	09 Aug 2017 06:45
Last Modified:	03 Oct 2023 00:53
DOI:	10.1111/abac.12101
Related URLs:	Author Publisher
URI:	https://livrepository.liverpool.ac.uk/id/eprint/3008876