Science China Mathematics

, Volume 55, Issue 11, pp 2367–2378

A discussion of Hong-Stein model

Articles

DOI: 10.1007/s11425-012-4520-x

Cite this article as:
Wang, S. & Zheng, W. Sci. China Math. (2012) 55: 2367. doi:10.1007/s11425-012-4520-x
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Abstract

In this paper, we discuss a kind of behavioral asset pricing model, called Hong-Stein model. Although this model succeeded in explaining the momentum and reversal effects, we find it usually reaches two extremes: the absolute value of autocorrelation of return sequence is so large that the direction of returns could be easily forecasted, or the value is so small that the elements in return sequence are almost independent of each other. The empirical results show that these two extremes are not supported by the real market data.

Keywords

under-reaction and overreactionHong-Stein modelreturn direction

MSC(2010)

62F0362M1062P05

Copyright information

© Science China Press and Springer-Verlag Berlin Heidelberg 2012

Authors and Affiliations

  1. 1.School of Finance and StatisticsEast China Normal UniversityShanghaiChina