2002/04/01 by Timothy C. Johnson · 499 citations
Business, Management and Accounting · Economics, Econometrics and Finance · #Corporate Finance and Governance #Dividend #Econometrics #Economics #Financial Markets and Investment Strategies #Financial Reporting and Valuation Research #Financial economics #Irrationality #Momentum (technical analysis) #Monetary economics #Rational expectations #Rationality #Simple (philosophy) #Stock (firearms) #Stock market
paper · doi:10.1111/1540-6261.00435
published in The Journal of Finance 57(2), 585-608 (Wiley)
openalex publication_date 2002/04/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/30
ABSTRACT Momentum effects in stock returns need not imply investor irrationality, heterogeneous information, or market frictions. A simple, single‐firm model with a standard pricing kernel can produce such effects when expected dividend growth rates vary over time. An enhanced model, under which persistent growth rate shocks occur episodically, can match many of the features documented by the empirical research. The same basic mechanism could potentially account for underreaction anomalies in general.