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Open Access
Article
Publication date: 14 November 2022

Simarjeet Singh, Nidhi Walia, Stelios Bekiros, Arushi Gupta, Jigyasu Kumar and Amar Kumar Mishra

This research study aims to design a novel risk-managed time-series momentum approach. The present study also examines the time-series momentum effect in the Indian equity…

Abstract

Purpose

This research study aims to design a novel risk-managed time-series momentum approach. The present study also examines the time-series momentum effect in the Indian equity market. Apart from this, the study also proposes a novel risk-managed time-series momentum approach.

Design/methodology/approach

The study considers the adjusted monthly closing prices of the stocks listed on the Bombay Stock Exchange from January 1996 to December 2020 to formulate long-short portfolios. Newey–West t statistics were used to test the significance of momentum returns. The present research has considered standard risk factors, i.e. market, size and value, to evaluate the risk-adjusted performance of time-series momentum portfolios.

Findings

The present research reports a substantial absolute momentum effect in the Indian equity market. However, absolute momentum strategies are exposed to occasional severe losses. The proposed time-series momentum approach not only yields 2.5 times higher return than the standard time-series momentum approach but also causes substantial enhancement in downside risks and higher-order moments.

Practical implications

The study's outcomes offer valuable insights for professional investors, capital market regulators and asset management companies.

Originality/value

This study is one of the pioneers attempting to test the time-series momentum effect in emerging economies. Besides, current research contributes to the escalating literature on risk-managed momentum by suggesting a novel revised time-series momentum approach.

Details

Journal of Economics, Finance and Administrative Science, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2077-1886

Keywords

Open Access
Article
Publication date: 30 November 2015

Jun Ho Hwang

This paper shows the momentum strategies that selected stocks based on their returns from a past 1 week generate long lasting significant abnormal returns. I observe the…

11

Abstract

This paper shows the momentum strategies that selected stocks based on their returns from a past 1 week generate long lasting significant abnormal returns. I observe the negative momentum profit from 1 week momentum portfolio and it disappears when the holding period is longer than 22 week.

In addition, I empirically shows that the weekly momentum strategies are able to generate negative profits also after the financial crisis. it is opposite result with literature, reported positive momentum after the financial crisis, I realize this result due to the characteristic of short term weekly momentum and market adjust returns. The price limit is one of the big features of Korean stock market. I consider the set of sample period by change of price limit. I find the positive momentum profits only in the period of narrow price limit range. For the check on the relation between liquidity and profit of momentum strategy, I employ the illiquid measure of Amihud (2002). I find that the strong and long lasting negative momentum profit from illiquid stock portfolio. This result implied that liquidity enhances the profit of momentum.

Details

Journal of Derivatives and Quantitative Studies, vol. 23 no. 4
Type: Research Article
ISSN: 2713-6647

Keywords

Article
Publication date: 3 May 2013

Mohamed Sahbi Nakhli and Lotfi Belkacem

The purpose of this paper is to test the performance of momentum strategies and identify the sources of their profits.

545

Abstract

Purpose

The purpose of this paper is to test the performance of momentum strategies and identify the sources of their profits.

Design/methodology/approach

To identify the main source of momentum profits, first, the bootstrap method with replacement was used. Then, to eliminate the existence of the small sample bias, the bootstrap method without replacement and the block bootstrap method were employed. In this case, when the authors draw the observations without replacement the random effect is reduced, whereas the resampling procedure is based on the random draw.

Findings

The empirical results show the existence of a small sample bias in the bootstrap method with replacement, and that the time‐series relations of stock returns are the main source of momentum profits.

Originality/value

To ensure the random effect of the draws, the authors develop a new resampling procedure called the mixed bootstrap method.

Details

Managerial Finance, vol. 39 no. 6
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 4 September 2007

Michael E. Drew, Madhu Veeraraghavan and Min Ye

The purpose of this paper is to investigate the profitability of momentum investment strategy and the predictive power of trading volume for equities listed in the…

1383

Abstract

Purpose

The purpose of this paper is to investigate the profitability of momentum investment strategy and the predictive power of trading volume for equities listed in the Australian Stock Exchange.

Design/methodology/approach

Following the Lee and Swaminathan's approach, portfolios on past returns and past trading volume is constructed. In this approach, all stocks are ranked independently on the basis of past returns and past trading volume. The stocks are then assigned to one of five portfolios based on past returns and one of three portfolios based on trading volume over the same period.

Findings

A strong momentum effect for the Australian market during the period 1988 through 2002 is observed. Further, momentum plays an important role in providing information about stocks. Past trading volume appears to predict both the magnitude and persistence of price momentum.

Research limitations/implications

Substantial momentum observed in monthly stock returns has investment implications. Abnormal returns vary from 0.3 to 7 per cent per month in the intermediate horizon.

Originality/value

This study provides an out of sample evidence by examining the relationship between “trading volume” (measured by the turnover ratio) and “momentum” strategies in an Australian setting.

Details

Managerial Finance, vol. 33 no. 10
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 13 September 2022

Mayank Joshipura and Sangeeta Wats

Over the past three decades, numerous conceptual and empirical studies have discussed momentum investment strategies’ presence, pervasiveness and persistence. However…

Abstract

Purpose

Over the past three decades, numerous conceptual and empirical studies have discussed momentum investment strategies’ presence, pervasiveness and persistence. However, science mapping in the field is inadequate. Hence, this study aims to comprehend and explore current dynamics, understand knowledge progression, elicit trends through thematic map analysis, synthesize knowledge structures and provide future research directions in this domain.

Design/methodology/approach

The study applies bibliometric analysis on 562 Scopus indexed articles from 1986 to 2021. Biblioshiny version 3.1.4, a Web-based application included in Bibiliometrix package developed in R-language (Aria and Cuccurullo, 2017), was used to examine: the most prominent articles, journals, authors, institutions and countries and to understand the thematic evolution and to elicit trends through the synthesis of knowledge structures including conceptual, intellectual and social structures of the field.

Findings

Motor themes, basic transverse, niche and emerging and declining themes were identified using (Callon, 1991) strategic thematic map. Besides, four major clusters based on a cocitation network of documents were identified: empirical evidence and drivers of momentum returns, theories explaining momentum returns and implications for asset pricing and market efficiency, avoiding momentum crashes and momentum in alternative asset classes, alternative explanations for momentum returns. The study infers that momentum research is becoming multidisciplinary given the dominance of behavioral theories and economic aspects in explaining the persistence of momentum profits and offers future research directions.

Research limitations/implications

The study deploys bibliometric analysis, appropriate for deriving insights from the vast extant literature. However, a meta-analysis might offer deeper insights into specific dimensions of the research topic. Besides, the study’s findings are based on Scopus indexed articles analyzed using bibilioshiny; the database and software limitations might have affected the findings.

Practical implications

The study is a ready reckoner for scholars who intend to recognize the evolution of momentum investment strategies, current dynamics and future research direction. The study offers practitioners insights into efficiently designing and deploying momentum investment strategies and ways to avoid momentum crashes.

Social implications

The study offers insights into the irrational behavior and systematic errors committed by market participants that helps regulators and policymakers to direct investors’ educational efforts to minimize systematic behavioral errors and related adverse financial consequences.

Originality/value

This comprehensive study on momentum investment strategies evaluates research trends and current dynamics draws a thematic map, knowledge progression in the field and offers future research directions.

Details

Qualitative Research in Financial Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1755-4179

Keywords

Book part
Publication date: 17 July 2011

Karen J. Jansen and David A. Hofmann

In a series of studies, we develop and validate an approach to studying momentum fluctuations over the course of organizational change to better understand the dynamics of…

Abstract

In a series of studies, we develop and validate an approach to studying momentum fluctuations over the course of organizational change to better understand the dynamics of change processes. The first study experimentally examines momentum fluctuations in a controlled change context and explores individual predictors of variance in momentum. The second study utilizes a real organizational setting, examining organizationally relevant predictors of momentum variance and the ability of momentum trends to predict meaningful organizational outcomes. Combined results provide evidence that momentum mapping is a valid approach for researchers and managers exploring processes that unfold over time.

Details

Research in Organizational Change and Development
Type: Book
ISBN: 978-1-78052-022-3

Book part
Publication date: 15 March 2022

Hong-Yi Chen, Chun-Huei Hsu and Sharon S. Yang

This study develops an environment, social, and governance (ESG) momentum strategy by combining information about ESG scores and the momentum effect. This study…

Abstract

This study develops an environment, social, and governance (ESG) momentum strategy by combining information about ESG scores and the momentum effect. This study, subsequently, applies the ESG momentum strategy to Taiwanese and Japanese stock markets and investigates the performance of the ESG momentum strategy in each market. Detailed comparisons of the ESG scores and ESG momentum performance between the two markets are conducted. The empirical results show that the ESG momentum strategy can obtain enhanced profits in the Taiwanese market, while the ESG momentum strategy cannot lead to substantial profits in the Japanese market. In addition, the ESG momentum effect in the Taiwanese market can last for three years after portfolio formation. In the Japanese market, the ESG contrarian strategy may deliver better profits than the ESG momentum strategy.

Details

Advances in Pacific Basin Business, Economics and Finance
Type: Book
ISBN: 978-1-80117-313-1

Keywords

Book part
Publication date: 11 August 2016

Knut F. Lindaas and Prodosh Simlai

We examine the incremental cross-sectional role of several common risk factors related to size, book-to-market, and momentum in size-and-momentum-sorted portfolios. Unlike…

Abstract

We examine the incremental cross-sectional role of several common risk factors related to size, book-to-market, and momentum in size-and-momentum-sorted portfolios. Unlike the existing literature, which focuses on the conditional mean specification only, we evaluate the common risk factors’ incremental explanatory power in the cross-sectional characterization of both average return and conditional volatility. We also investigate the role of ex-ante market risk in the cross-section. The empirical results demonstrate that the size-and-momentum-based risk factors explain a significant portion of the cross-sectional average returns and cross-sectional conditional volatility of the benchmark equity portfolios. We find that the Fama–French (1993) factors and the ex-ante market risk are priced in the cross-sectional conditional volatility. We conclude that the size-and-momentum-based factors provide a source of risk that is independent of the Fama–French factors as well as ex-post and ex-ante market risk. Our results bolster the risk-based explanation of the size and momentum effects.

Details

The Spread of Financial Sophistication through Emerging Markets Worldwide
Type: Book
ISBN: 978-1-78635-155-5

Keywords

Book part
Publication date: 19 December 2016

Bob Li, Mong Shan Ee, Yee Ling Boo and Mamunur Rashid

Ever since the publication of the original Jegadeesh and Titman (1993) study, momentum effect has been tested vigorously to validate its pervasiveness for different time…

Abstract

Purpose

Ever since the publication of the original Jegadeesh and Titman (1993) study, momentum effect has been tested vigorously to validate its pervasiveness for different time periods and across different markets. In spite of numerous out-of-sample tests, there is one apparent alibi – little research has been devised for steady increasing of Shari’ah compliant stocks.

Methodology/approach

This study is to examine the momentum strategy returns in a global Shari’ah compliant stock setting.

Findings

It finds strong presence of stock momentum returns for Pakistan and Malaysia. And the momentum returns are neither driven by industry momentum nor by the small size stocks. Though no momentum profits are found for the portfolios formed by global Shari’ah compliant stocks, this seems to be largely due to return reversal for the small size Shari’ah compliant stocks.

Originality/value

The strong presence of momentum profits for relatively large Shari’ah compliant stocks is a desirable trait as it indicates that the momentum trading strategies are practical and implementable.

Details

Advances in Islamic Finance, Marketing, and Management
Type: Book
ISBN: 978-1-78635-899-8

Keywords

Article
Publication date: 9 August 2022

Le Quy Duong and Philippe Bertrand

Although the solid empirical proof of momentum is documented in various stock markets, there are many debates among academics with respect to the source of momentum

Abstract

Purpose

Although the solid empirical proof of momentum is documented in various stock markets, there are many debates among academics with respect to the source of momentum profit. The first aim of this paper is intensively re-examine the momentum profit in Vietnam, an important emerging market. Secondly, the authors study the return predictability of a measure of investors’ overreaction, then examine whether the momentum effect in Vietnam is explained by overreaction.

Design/methodology/approach

Using the weekly data of more than 300 non-financial Vietnamese stocks during 2009–2019, the authors build a measure of investors’ overreaction, which is based on trading volume and the sign of stock returns. Consequently, to investigate whether momentum exits after controlling for overreaction, the authors carefully compare trading strategies based on overreaction with price momentum strategies using adjusted returns and double sorts on past returns and levels of overreaction.

Findings

The article makes three main findings. Firstly, the authors discover the empirical evidence of momentum in the Vietnamese equity market. Secondly, the measure of overreaction could be a predictor of Vietnamese stock returns. Stocks that have experienced a stronger upward overreaction provide a higher average return. Finally, returns on trading strategies based on overreaction are robust after adjusting for momentum, while returns on momentum portfolios become insignificant after adjusting for overreaction. By double-sorting, the authors document that holding past returns constant, the average returns of portfolios rise monotonically with their measure of overreaction. Hence, the momentum profit in Vietnam arises from investors’ overreaction.

Originality/value

The paper extends previous research on the behavioral explanation of momentum in emerging stock markets, which has not been fully exploited in the literature.

Details

Managerial Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0307-4358

Keywords

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