Investor Attention, Visual Price Pattern, and Momentum Investing

Investor Attention, Visual Price Pattern, and Momentum Investing

Li-Wen Chen National Chung Cheng University

Hsin-Yi Yu National University of Kaohsiung

July 12, 2013

Since investor attention is limited, stocks that attract attention are more likely to be chosen, while stocks that do not attract attention are often ignored. Given that a visual mode of analysis is more conductive to human cognition than algebraic numbers, we propose that the visual pattern of past prices is a salient signal that attracts investor attention, and thereby boosts returns. The stocks in the winner and loser groups are further classified based on their visual patterns of past prices. We construct a long-short portfolio including the stocks which are more likely to grab investor attention by their discernible visual patterns of past prices. Our long-short portfolio commands a compounded annual risk-adjusted return of 23.1%, almost double the conventional momentum profit. The outperformance holds under various alternative specifications. Moreover, the sheer size of these profits poses a further, significant challenge to the asset pricing literature and the market efficiency hypothesis.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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