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|Title||Momentum or Contrarian? Identifying Determinants of Investor Beliefs|
|Institution||University of Zurich|
|Faculty||Faculty of Economics, Business Administration and Information Technology|
|Number of Pages||69|
|Abstract Text||In this study we investigate what factors of stock price trajectories influence investors toward believing in trend continuation or mean reversion. In particular, we focus our interest on the volatility, the long/short term trend, and the perceived randomness of past prices, since they represent a foundation on which the investors are likely to base their predictions. We find that the volatility in general has the insignificant effect. Impacts of the long term trend and the short term trend are significant and, that depending on the direction of these trends, they either contribute to the belief in trend continuation or to the belief in mean reversion. However, our findings imply that the effect of the short term trend is substantially stronger than the effect of long term trend. Regarding the perceived randomness, our results suggest that if the underlying mechanism is perceived as fully random, biases in individuals' decision-making are reduced to minimum level.|