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Momentum Strategies: Evidence from Pacific Basin Stock Markets

Authors


  • We are grateful to Jennifer Conrad (the referee), Kalok Chan, Bruce Grundy, Ho Yew Kee, Narashimhan Jegadeesh, Grant McQueen, Willliam T. Moore (the editor), Lilian Ng, and Geert Rouwenhorst for helpful comments and suggestions. We would also like to thank seminar participants at National University of Singapore, 2000 FMA meetings (Seattle), 1999 PACAP meetings (Singapore), and 1999 Australasian Finance and Banking conference. U.S. momentum returns data provided by Geert Rouwenhorst are gratefully acknowledged. Allaudeen Hameed and Yuanto Kusnadi acknowledge the financial support from NUS Academic Research Grant and NUS Research Scholarship, respectively. Any remaining errors are ours.

Abstract

We investigate the profitability of momentum investment strategy in six Asian stock markets. Unrestricted momentum investment strategies do not yield significant momentum profits. Although we find that a diversified country-neutral strategy generates small but statistically significant returns during 1981–1994, when we control for size and turnover effects we find that the country-neutral profits dissipate. Our evidence suggests that the factors that contribute to the momentum phenomenon in the United States are not prevalent in the Asian markets.

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