This paper investigates whether short-term momentum and long-term reversal may emerge from the wealth reallocation process taking place in speculative markets. We assume that there are two classes of investors who trade long-lived assets by holding constantly rebalanced portfolios based on their beliefs. Provided beliefs, and thus portfolios, are sufficiently diversified, all investors survive in the long-run and, due to waves of mispricing, the resulting equilibrium returns exhibit long-term reversal. If, moreover, asset dividends are positively correlated, investors’ profitable trades become positively correlated too, thus generating short-term momentum in equilibrium returns. We use the model to replicate the performance of the Winners and Losers portfolios highlighted by the empirical literature and to provide insights on how to improve upon them. Finally, we show that dividend positive autocorrelation is positively related to momentum and negatively related to reversal while diversity of beliefs is positively related to both momentum and reversal.

中文翻译：

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具有持续异质性的金融市场动量和逆转

本文研究投机市场中发生的财富重新分配过程是否会出现短期动量和长期逆转。我们假设有两类投资者根据其信念通过持有不断调整的投资组合来交易长期资产。只要信念和投资组合足够多样化，所有投资者就可以长期生存，并且由于定价错误的浪潮，所产生的均衡回报表现出长期逆转。此外，如果资产股息呈正相关，那么投资者的获利交易也将呈正相关，从而在均衡收益中产生短期动量。我们使用该模型来复制经验文献强调的赢家和输家组合的绩效，并提供有关如何改进它们的见解。最后，我们表明，股息的正自相关与动量成正相关，与逆转成负相关，而信念的多样性与动量和逆转都成正相关。