Noise momentum around the world

Cai, Charlie X., Faff, Robert and Shin, Yongcheol (2017) Noise momentum around the world. Abacus, . doi:10.1111/abac.12101

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Author Cai, Charlie X.
Faff, Robert
Shin, Yongcheol
Title Noise momentum around the world
Journal name Abacus   Check publisher's open access policy
ISSN 1467-6281
Publication date 2017-03-20
Year available 2017
Sub-type Article (original research)
DOI 10.1111/abac.12101
Open Access Status File (Author Post-print)
Total pages 26
Place of publication Richmond, VIC Australia
Publisher Wiley-Blackwell Publishing Asia
Language eng
Abstract 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.
Keyword Futures and spot prices
Initial mispricing correction
Limited arbitrage
Noise momentum
Q-Index Code C1
Q-Index Status Provisional Code
Institutional Status UQ

Document type: Journal Article
Sub-type: Article (original research)
Collections: HERDC Pre-Audit
UQ Business School Publications
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Created: Tue, 11 Apr 2017, 00:25:16 EST by Web Cron on behalf of UQ Business School