This paper sheds empirical light on whether sentiment affects the profitability of price momentum strategies. We hypothesize that news that contradicts investors' sentiment causes cognitive dissonance, which slows the diffusion of signals that oppose the direction of sentiment. This phenomenon...

Using daily short sale transactions data for firms traded in the Taiwan Stock Exchange (TWSE) from January 1991 to January 2007, we examine the pattern of short selling trading prior to 338 acquisition announcements. Consistent with the view that short sellers act as informed traders, we find...