Review of Quantitative Finance and Accounting

, Volume 39, Issue 2, pp 165–188 | Cite as

Capital investment and momentum strategies

  • Guohua Jiang
  • Donglin Li
  • Gang Li
Original Research


The main purpose of this paper is to investigate whether capital investment can affect stock price momentum. We provide empirical evidence that momentum strategies tend to be more profitable for stocks with large capital investment or investment changes. We present a simple explanation for our empirical results and show that our finding is consistent with the behavioral finance theory that characterizes investors’ increased psychological bias and the more limited arbitrage opportunity when the estimation of firm value becomes more difficult or less accurate.


Capital investment Momentum strategy Momentum profit Behavioral finance 

JEL Classification

G11 G12 G14 M41 


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Copyright information

© Springer Science+Business Media, LLC 2011

Authors and Affiliations

  1. 1.Department of Accounting, Guanghua School of ManagementPeking UniversityBeijingPeople’s Republic of China
  2. 2.Department of Finance, College of BusinessSan Francisco State UniversitySan FranciscoUSA

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