## Journal of Applied Probability

### Momentum liquidation under partial information

#### Abstract

Momentum is the notion that an asset that has performed well in the past will continue to do so for some period. We study the optimal liquidation strategy for a momentum trade in a setting where the drift of the asset drops from a high value to a smaller one at some random change-point. This change-point is not directly observable for the trader, but it is partially observable in the sense that it coincides with one of the jump times of some exogenous Poisson process representing external shocks, and these jump times are assumed to be observable. Comparisons with existing results for momentum trading under incomplete information show that the assumption that the disappearance of the momentum effect is triggered by observable external shocks significantly improves the optimal strategy.

#### Article information

Source
J. Appl. Probab., Volume 53, Number 2 (2016), 341-359.

Dates
First available in Project Euclid: 17 June 2016

https://projecteuclid.org/euclid.jap/1466172858

Mathematical Reviews number (MathSciNet)
MR3514282

Zentralblatt MATH identifier
06614113

#### Citation

Ekström, Erik; Vannestål, Martin. Momentum liquidation under partial information. J. Appl. Probab. 53 (2016), no. 2, 341--359. https://projecteuclid.org/euclid.jap/1466172858

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