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Nominal price illusion, return skewness, and momentum

Author

Listed:
  • Jia, Yuecheng
  • Xu, Zheng
  • Yan, Shu
  • Zhang, Runyu

Abstract

We document a significantly negative association between the nominal price measure of Birru and Wang (2015) and the profit of the stock momentum strategy. The negative relationship is driven by the underperformance of loser stocks with high nominal price illusions. Further analysis shows that the previously documented positive correlations between return skewness measures and momentum profit are subsumed by the effect of nominal price on momentum profit.

Suggested Citation

  • Jia, Yuecheng & Xu, Zheng & Yan, Shu & Zhang, Runyu, 2024. "Nominal price illusion, return skewness, and momentum," Finance Research Letters, Elsevier, vol. 67(PB).
    • Handle: RePEc:eee:finlet:v:67:y:2024:i:pb:s1544612324009292
    DOI: 10.1016/j.frl.2024.105899
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    References listed on IDEAS

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    1. Bali, Turan G. & Cakici, Nusret & Whitelaw, Robert F., 2011. "Maxing out: Stocks as lotteries and the cross-section of expected returns," Journal of Financial Economics, Elsevier, vol. 99(2), pages 427-446, February.
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    More about this item

    Keywords

    Nominal price illusion; Return skewness; Momentum;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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