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Look at my watch! Continuous information and momentum in the market for luxury watches
Siegfried Köstlmeier, Klaus Röder
University of Regensburg, Germany
We find a consistent momentum return premium of 1.25% p.m. in the global market for luxury watches between June 2017 and September 2024. Consistent with the frog-in-the-pan hypothesis, investors are inattentive to a series of frequent gradual returns during the momentum formation period and draw more attention to infrequent large returns. Momentum portfolio profits decrease from 1.67\% for luxury watches with continuous information during their formation period to -0.38\% for watches with discrete information but similar cumulative formation-period returns. Conditional on continuous information, momentum profits covary with the market state, return dispersion, and investor sentiment. Our results indicate that the disposition effect is not responsible for the return predictability of continuous information.
