We propose a rational expectations model of momentum and reversal based on sequential information acquisition around public disclosure. As more number of informed traders enter the markets with better information over time, liquidity premia gradually decrease and this leads to momentum. Reversal arises because prices deviated from the fundamental value due to liquidity trades are corrected in the long run. In the model, early-informed investors partially reverse their trades after public disclosure and trade against the serial correlation of asset returns. Meanwhile, late-informed investors follow contrarian strategies and their trades positively correlate with future asset returns. The model shows that, during financial crises, early-informed traders may escape from the markets and the price system becomes extremely uninformative.​