Delisted stocks and momentum: Evidence from a new Australian dataset

2016 ◽  
Vol 42 (1) ◽  
pp. 140-160 ◽  
Author(s):  
Thanh D Huynh ◽  
Daniel R Smith
Keyword(s):  
Trading Strategy ◽  
Momentum Effect ◽  
Momentum Strategies ◽  
Momentum Profits ◽  
Momentum Trading ◽  
The Impact ◽  
The U.S

We explore the impact of delisting on the performance of the momentum trading strategy in Australia. We employ a new dataset of hand-collected delisting returns for all Australian stocks and provide the first study outside the U.S. to jointly examine the effects of delisting and missing returns on the magnitude of momentum profits. In the sample of all stocks, we find that the profitability of momentum strategies depends crucially on the returns of delisted stocks, especially on bankrupt firms. In the sample of large stocks, however, the momentum effect remains strong after controlling for the effect of delisted stocks, in contrast to the U.S. evidence in which delisting returns can explain 40% of momentum profits. As these large stocks are less exposed to liquidity risks, the momentum effect in Australia is even more puzzling than in the U.S.

scholarly journals Investor Attention, Market Dynamics, and Momentum in the Korean Stock Market

2020 ◽  
Vol 49 (4) ◽  
pp. 589-641
Author(s):  
Cheoljun Eom ◽  
Uk Chang ◽  
Byung Jin Kang ◽  
Woo Baik Lee ◽  
Jong Won Park
Keyword(s):  
Stock Market ◽  
Market Dynamics ◽  
Momentum Effect ◽  
High Turnover ◽  
Investor Attention ◽  
Momentum Profits ◽  
Korean Stock Market ◽  
Market Situation ◽  
The Impact ◽  
Loser Portfolio

This study examines the effects of investor attention on momentum in the Korean stock market. The results reveal significant negative momentum profits in stock groups with high investor attention (high turnover stocks), but insignificant results in those with low investor attention (low turnover stocks). Within high turnover stock groups, the winner portfolio has a declining price trend and insignificant performance, while the loser portfolio realizes significant positive performance through a substantial price increase in the future period. The momentum effect is highly dependent on the reversed performance of the loser portfolio. Second, the performance of the large overreaction stock group shows a more significant negative momentum effect compared to the low overreaction stock group, that is, the degree of overreaction significantly affects the momentum effect. Third, negative momentum profits are consistently observed regardless of the market dynamics. Specifically, more substantial and significant negative performance occurs in the transition market, where the market situation reverses between the past and future periods. Fourth, negative momentum profits are consistently identified even after controlling for the impact of common factors and volatility and liquidity into turnover. Our findings are qualitatively different from the characteristics of the traditional momentum effects generally reported in Western countries.

Momentum anomaly: evidence from the Indian stock market

2017 ◽  
Vol 14 (1) ◽  
pp. 3-22 ◽  
Author(s):  
Supriya Maheshwari ◽  
Raj Singh Dhankar
Keyword(s):  
Stock Market ◽  
Trading Volume ◽  
Investment Strategy ◽  
Momentum Effect ◽  
Momentum Strategies ◽  
Content Type ◽  
Momentum Profits ◽  
The Usa ◽  
Short Run ◽  
Indian Stock Market

Purpose The purpose of this paper is to provide insights into the profitability of momentum strategies in the Indian stock market. This study further evaluates whether the momentum effect is a manifestation of size, value or an illiquidity effect. Design/methodology/approach Monthly stock return data of 470 BSE listed stocks over the sample period from January 1997 to March 2013 were used to create extreme portfolios (winner and loser). The returns of extreme portfolios were evaluated using t-statistics and a risk-adjusted measure. Further checks were imposed by controlling for other potential sources of risk including size, value and illiquidity. Findings The study provides support in favor of momentum profitability in the Indian stock market. In contrast to the literature, momentum profitability is driven by winning stocks, and hence, buying past winning stocks generates higher returns than shorting loosing stocks in the Indian stock market. Strong momentum profits were observed even after controlling for size, value and trading volume of stocks. This suggests that the momentum effect in the Indian stock market is not a manifestation of small size effect, value effect or an illiquidity effect. Practical implications From the practitioner’s perspective, the study indicates that a momentum-based investment strategy in the short run is still persistent and can generate potential profits in the Indian stock market. Originality/value There is little empirical evidence on the momentum profitability, especially in the Indian stock market. The study contributes toward the literature by analyzing the momentum profitability even after controlling for size, value and an illiquidity effect. Some aspects of the momentum effect were observed to be dissimilar from those observed in literature for the USA and other countries. Such findings justify the need for testing the momentum profitability in stock markets other than the USA.

scholarly journals The Profitability of Momentum Strategies: Empirical Evidence from Damascus Securities Exchange (DSE)

2018 ◽  
Vol 5 (1) ◽  
pp. 16-29
Author(s):  
Oubay Mahmoud ◽  
Almougheer I Wardeh
Keyword(s):  
Empirical Evidence ◽  
Market Risk ◽  
Trading Strategies ◽  
Market Model ◽  
Momentum Effect ◽  
Momentum Strategy ◽  
Momentum Strategies ◽  
Monthly Data ◽  
Contrarian Strategy ◽  
Momentum Profits

The purpose of this study is to examine the profitability of Momentum based- trading strategies and investigate the causes of such profitability in Damascus Securities Exchange (DSE) market. The study analyzed 16 Momentum strategies based on full rebalancing and equally weighted techniques using monthly data from January 2010 to December 2016. The findings of the study showed low but significant Momentum effect, where the returns of Momentum portfolios were statistically positive only in 1 out of 16 strategies. Our findings suggest that Momentum strategy is applicable for winner portfolios whereas contrarian strategy is more appropriate for loser portfolios. We also adopted Market Model in order to investigate the possible risk-based explanations of Momentum profits, but we found that market risk is unable to explain the Momentum profitability in DSE market.

scholarly journals Do momentum strategies perform better for Islamic stocks than for conventional stocks across market states?

2019 ◽  
Vol 64 (221) ◽  
pp. 107-129
Author(s):  
Lain-Tze Tee ◽  
Si-Roei Kew ◽  
Soo-Wah Low
Keyword(s):  
Risk Factors ◽  
Equity Market ◽  
Trading Strategies ◽  
Risk Compensation ◽  
Momentum Effect ◽  
Stock Trading ◽  
Momentum Strategies ◽  
Momentum Profits ◽  
State Dependent ◽  
Market State

This study compares the momentum profitability of Islamic and conventional stocks in Malaysia and examines whether the presence of momentum profits is market-state dependent. Winner portfolios are shown to outperform loser portfolios, suggesting that a momentum effect exists in the equity market. Islamic stocks exhibit stronger momentum than conventional stocks. Interestingly, although pursuing profit is not the primary goal of Islamic stock investors, the findings indicate that momentum profits for all Islamic stock trading strategies are higher than those for conventional stocks. The profits from momentum strategies for both stocks are market-state dependent. In all trading strategies, while there are significant positive momentum profits following market upturns, there is no evidence of profits subsequent to market downturns. Overall, Islamic stocks yield higher momentum profits than conventional stocks across market states. These findings are robust to using various measures of the state of the market. While the presence of momentum profits is also robust to the inclusion of Fama-French?s (1993) risk factors, the risk factors are unable to explain momentum profits, suggesting that the risk-adjusted momentum profits are not due to risk compensation. Rather, the profitability is evidence of stock mispricing.

scholarly journals Market Volatility and Momentum: Evidence from Pakistani Stock Exchange

2017 ◽  
Vol 4 (1) ◽  
pp. 82 ◽  
Author(s):  
Anila Rafique Khan ◽  
Muhammad Waqas ◽  
Arshad Hassan
Keyword(s):  
Business Cycle ◽  
Stock Exchange ◽  
Statistical Significance ◽  
Market Volatility ◽  
Momentum Strategies ◽  
Cross Sectional ◽  
Momentum Profits ◽  
Market State ◽  
The Business Cycle ◽  
The Impact

This study explores the relationship between market volatility and momentum profitability. This study indicates that market state volatility has significant power to forecast momentum payoffs, especially in negative market states. The results are the context in the presence of market state and business cycle variables. Market premium is significant and negative. Market volatility is also found negatively influencing momentum profits. Volatility is divided into volatility in the positive market and volatility in the negative market. Both are significantly and negatively influencing momentum profits. Vol+ and Vol- both have negative signs; Vol- is dominant in terms of the magnitudes of the coefficient and the t-statistics. Business cycle effect measured by term and yield is not found significant. Non-linearity has not been observed regarding the term. Results are found robust for market adjusted momentum payoff. The study also explores the impact of market state, volatility and business cycles on the return of loser and winner portfolio. This study reports that returns of the loser portfolios are explained by market component, whereas volatility is found to be insignificant. The macroeconomic variables TERM, TERM2 and YLD show signs of statistical significance. Market factor is significantly and positively influencing winner portfolios. The results indicate that volatile markets forecast low returns on winner stocks. Return dispersion used to measures cross-sectional is also found significant. The study recommends that investors should devise investment and momentum strategies on the basis of the volatility of stocks and the business cycle. The tests of this study show that volatile down markets forecast low momentum payoffs. The time-series predictability of momentum is asymmetric, which arises from loser stocks.

Momentum strategies in times of economic policy uncertainty

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Jessica Paule-Vianez ◽  
Júlio Lobão ◽  
Raúl Gómez-Martínez ◽  
Camilo Prado-Román
Keyword(s):  
Economic Policy ◽  
Policy Uncertainty ◽  
Momentum Effect ◽  
Economic Cycle ◽  
Momentum Strategies ◽  
Content Type ◽  
Economic Policy Uncertainty ◽  
Point Increase ◽  
The Us ◽  
The Impact

Purpose This paper aims to evaluate the influence of economic policy uncertainty (EPU) on the momentum effect, analysing its influence depending on the economic cycle and in different quantiles. Design/methodology/approach To determine the influence of EPU in the momentum effect taking into account the economic cycle and the level of the quantile, linear regression and quantile regression have been applied for the period from 2 January 1985 to 30 April 2019 for the US stock market. Findings It is shown that an increased feeling of insecurity associated with EPU reduces the momentum effect, especially in times of recession. Distinguishing by quantiles, an asymmetry in the impact of EPU in the momentum effect is discovered, finding that EPU reduces (increases) the profits of momentum strategies in the lowest (highest) quantiles. In the highest quantiles, an investor can obtain higher extraordinary returns with this strategy. For example, in the highest quantile, a one-point increase in the EPU levels would have increased the daily profitability by 12.7 basis points. These findings have important implications for investors and policymakers. Originality/value To the best of the authors’ knowledge, this is the first paper that evaluates the influence of EPU on the momentum effect by conducting an analysis based on the economic cycle and different quantiles, demonstrating how these factors are relevant in the influence of this uncertainty in the momentum anomaly.

Are Indian Investors Return Chasers? An Anatomy of their Trading Behavior

GIS Business ◽  
2016 ◽  
Vol 11 (3) ◽  
pp. 32-44
Author(s):  
Martin Bernard ◽  
Malabika Deo
Keyword(s):  
Equity Returns ◽  
Trading Behavior ◽  
Momentum Effect ◽  
Momentum Strategy ◽  
Price Momentum ◽  
Momentum Profits ◽  
Indian Context ◽  
Time Period ◽  
Monthly Return ◽  
Indian Stock Market

Momentum has remained an unanswered anomaly in finance literature. Researchers have pointed out two arguments, whether the source of prior return anomalies are rational or behavioral. In this paper, we examined return chasing tendency investors and the profitability of probable price momentum strategy in Indian equity market using the monthly return data of equities represented in BSE-500 index encompassing the time period from July 2004 to Jun 2014. Study is an attempt to analyze momentum effect before, during and after the financial crisis of 2007–2009 to check whether investors continue to follow the same strategy during crisis or their behavior undergoes any change. Also study examined the adequacy of rational CAPM models to explain momentum profits. The result evidenced a strong presence of economically and statistically significant momentum profit in Indian stock market equity returns. Therefore return chasing tendency of Indian investors is found to be persistent in the intermediate horizon in Indian context. Closer observation of the results reveals that, Indian investors are winners chasers rather than investor in past losers. Study also confirmed that investors sentiments are volatile according to general market environment and inadequacy of rationalist equilibrium model to explain momentum profits.

The Impact of Globalization on the U.S. Defense Industrial Base

2013 ◽  
Author(s):  
Jacques S. Gansler ◽  
William Lucyshyn ◽  
John Rigilano
Keyword(s):  
Industrial Base ◽  
The Impact ◽  
The U.S
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