The momentum ambiguity and investor trading behavior

This paper investigates the impact of momentum ambiguity on investor trading behavior. Specifically, our findings suggest that in the presence of momentum (reversal) effects in asset returns, investors'demand for the risky asset comprises myopic, hedging, and speculative components. Due to the opposite signs of hedging and speculative demands, the relationship between total demand and momentum effects may display a nonmonotonic trend. The introduction of momentum uncertainty leads investors to adopt a more conservative approach, and in some cases, abstain from trading the risky asset altogether. Additionally, we observe heterogeneity in the impact of momentum and reversal uncertainty levels on investor demand.