Author(s)

KiHoon Jimmy Hong, Stephen Satchell

Korea Capital Market Institute, Seoul, Korea.
Trinity College, University of Cambridge, Cambridge, UK.

This paper looks at various definitions of momentum then investigates a particular definition of momentum via a statistical model where the asset price is assumed to follow a log Ornstein–Uhlenbeck process. Momentum is a term that is widely used to describe price behaviour but is not clearly defined in terms of statistical models. The results we derive show that asset price momentum is determined by price autocorrelation and that positive momentum, as commonly understood, would require explosive behaviour in log prices.

Momentum; Ornstein – Uhlenbeck; Price Trend; Price Autocorrelation

K. Hong and S. Satchell, "Defining Single Asset Price Momentum in terms of a Stochastic Process," Theoretical Economics Letters, Vol. 2 No. 3, 2012, pp. 274-277. doi: 10.4236/tel.2012.23050.