This paper examines to what extent the momentum spread ratio (MSR) can predict momentum profits. The momentum spread ratio as a potential proxy of investor underreaction can significantly predict the momentum, industry momentum, and residual momentum, especially after 1994, suggesting that...

This paper takes a new approach to examine whether investors extrapolate from past returns to form expectations about future stock returns. Unlike prior research that relies on experiments or surveys to derive investors' expectations, we estimate expected returns directly from stock prices, the...