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Published VersionCC BY V4.0, Open Access
Journal article
A Brain-Based Foundation for Momentum
Journal of Risk and Financial Management, Vol.19(1), pp.1-16
2025
Abstract
Is momentum a psychology-based phenomenon or is momentum driven by earning fundamentals? Applying predictive processing from brain sciences, I show that a new explanation emerges in which momentum is jointly driven by earning fundamentals and psychology-based mechanisms. The following novel insights emerge and are consistent with empirical evidence: (i) Momentum is stronger in high-performing sectors. (ii) Momentum gets weaker as attention from investors increases. (iii) Momentum is stronger overnight. (iv) Momentum is weaker during unusual times. (v) Momentum stocks respond asymmetrically to positive vs. negative earning news. Overall, this article shows that the brain is an exciting new frontier for momentum research to explore.
Details
- Title
- A Brain-Based Foundation for Momentum
- Authors
- Hammad Siddiqi (Corresponding Author) - University of the Sunshine Coast, Queensland, School of Business and Creative Industries
- Publication details
- Journal of Risk and Financial Management, Vol.19(1), pp.1-16
- Publisher
- MDPI AG
- Date published
- 2025
- DOI
- 10.3390/jrfm19010003
- ISSN
- 1911-8074; 1911-8066
- Copyright note
- © 2025 by the author. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license.
- Data Availability
- No new data were created or analyzed in this study.
- Organisation Unit
- School of Business and Creative Industries
- Language
- English
- Record Identifier
- 991192342602621
- Output Type
- Journal article
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