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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 negative…

29

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

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 market…

1241

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. 27 no. 54
Type: Research Article
ISSN: 2218-0648

Keywords

Open Access
Article
Publication date: 30 November 2018

Changha Kim and Changjun Lee

Previous literature in the Korean stock market has shown that the momentum effect is not observed during pre-2000 period while it is observed during post-2000 period. Given that…

70

Abstract

Previous literature in the Korean stock market has shown that the momentum effect is not observed during pre-2000 period while it is observed during post-2000 period. Given that market illiquidity has substantially decreased during post-2000 period, we examine whether the level of market illiquidity affect the momentum profits. The central findings are summarized as follows. First, our full-sample analysis shows that market liquidity is positively associated with momentum profits, meaning that the observed momentum effect during post-2000 period is related to the decrease in market illiquidity. Second, during pre-2000 period, when the market illiquidity is very high, the illiquidity of past losers is extremely high compared to that of past winners. However, there is no significant difference in illiquidity between winners and losers during post-2000 period. Third, based on this result, we conjecture that the momentum effect is related to the different compensation for liquidity risk between past losers and winners, and test whether this is indeed the case. We find significant momentum profits over the whole period when we consider the compensation for the liquidity risk of past losers and winners. In addition, during pre-2000 period, the return on momentum strategy that controls the liquidity risk is substantially higher than the actually observed momentum profits. In sum, our study suggests that the difference in compensation for liquidity risk between past losers and winners is very important in understanding the momentum effect in the Korean stock market.

Details

Journal of Derivatives and Quantitative Studies, vol. 26 no. 4
Type: Research Article
ISSN: 2713-6647

Keywords

Open Access
Article
Publication date: 22 March 2021

Jaewan Bae and Changjun Lee

This paper examines the role of illiquidity and duration factor in understanding the momentum profit in the Korean stock market. We find that the foreigner/institutional…

Abstract

This paper examines the role of illiquidity and duration factor in understanding the momentum profit in the Korean stock market. We find that the foreigner/institutional illiquidity factor explains the momentum effect. In addition, this paper finds that duration factor defined as the difference in returns of short-duration and long-duration stocks captures well the momentum profits. That is, a two-factor model with the market and duration factor performs much better than competing asset pricing models in explaining the momentum effect. Finally, when controlling for the duration factor, the explanatory power of the foreign/institutional illiquidity factor on the momentum profits disappears. In sum, our empirical finding indicates that the duration factor is the most important ingredient in understanding the momentum effect in the Korean stock market.

Details

Journal of Derivatives and Quantitative Studies: 선물연구, vol. 29 no. 1
Type: Research Article
ISSN: 1229-988X

Keywords

Open Access
Article
Publication date: 29 June 2021

Myounghwa Sim and Hee-Eun Kim

The authors investigate the effect of a short-term stock return reversal on the term structure of momentum profits in the Korean stock market following Goyal and Wahal (2015)…

1375

Abstract

The authors investigate the effect of a short-term stock return reversal on the term structure of momentum profits in the Korean stock market following Goyal and Wahal (2015). Their empirical findings show that the term structure of momentum is more pronounced when a return reversal lasts up to two months but is substantially weakened when past performance over the last two months is not taken into account for portfolio formation. Their evidence suggests that the term structure of momentum profitability arises primarily from a carryover of the return reversal from the previous two months.

Details

Journal of Derivatives and Quantitative Studies: 선물연구, vol. 29 no. 3
Type: Research Article
ISSN: 1229-988X

Keywords

Open Access
Article
Publication date: 8 June 2021

Mohamed Shaker Ahmed

The present research aims to examine a range of momentum trading strategies for the tourism and hospitality sector.

1406

Abstract

Purpose

The present research aims to examine a range of momentum trading strategies for the tourism and hospitality sector.

Design/methodology/approach

The paper followed the methodology of Jegadeesh and Titman (1993) to construct the portfolios. In this methodology, all portfolios were formed and evaluated by their cumulative stock returns over the past J periods and holding the position for the next K periods. In total, nine formation and holding periods were used, represented by 3, 6 and 12. For example, strategy 3–3 (that is, strategy with J = 3 and K = 3) refers to the strategy that stocks are ranked based on their previous three months and then held for the next three months.

Findings

The findings demonstrated that none of these momentum investing strategies was profitable. Most of the results, however, show positive, but insignificant momentum returns. This finding can be interpreted as price reversal over a horizon of three to twelve months in the US hospitality and tourism sector. These results are robust to size, different formation and holding combinations, beta and turnover.

Research limitations/implications

Regarding the research limitations, this paper only considers the US tourism and hospitality sector. Therefore, the extension of results to other developed and developing markets should be taken carefully. Also, this paper relies only on the methodology of Jegadeesh and Titman (1993). Other methodologies could be suitable avenues for future research.

Practical implications

Investors and portfolio managers who seek for earning abnormal returns by investing in the US HT stocks can attain their hopes by constructing portfolios based on existing guidelines in the literature and adopting a short-term reversal trading strategy or by buying past losers and selling past winners of the US tourism and hospitality stocks.

Originality/value

This research contributes to the hospitality finance literature by offering the investors who are interested in the US hospitality and tourism sector an uncomplicated trading rule that uses real return data and is expected to generate actual returns. Moreover, the momentum strategy of Jegadeesh and Titman (1993) is never used in the hospitality finance literature.

研究目的

本研究旨在探討各種可應用於旅遊及酒店業的動量交易策略。

研究設計/方法/理念

本文按照 Jegadeesh 和 Titman(1993)的研究方法來建造投資組合。使用這研究方法時,所有投資組合均以它們在過去J 時期的累積股票收益和在未來K 時期的持倉來建立及評價的。九個組成方式及持有期被使用,以3、6、12來表示。例如,策略3-3(那就是說,該策略以J = 3和 K = 3)指的策略是以有關的股票基於過去三個月而被分等級,繼而在未來三個月被持有。

研究結果

研究結果顯示,這些投資策略全沒帶來利潤;唯大部分結果顯示正動能策略報酬,雖報酬是微不足道的。這研究結果或許可理解為在美國酒店及旅遊業為期三至十二個月的價格逆轉。這些結果就規模、不同組成方式和持有組合、beta 和成交量而言是強而有力的。

研究的局限/意義

就研究的局限而言,本文只是考慮美國的酒店及旅遊業;因此,如把研究結果伸延至其它已開發或發展中的市場,則需小心處理。另外,本文只依賴 Jegadeesh 和 Titman(1993)的研究方法,就此,使用其它研究方法會是日後相關研究的適當途徑。

實際的意義

欲透過投資於美國酒店及旅遊股票而尋求賺取異常收益的投資者和投資組合經理可如願以償,方法是基於文獻內現存的準則建造投資組合,以及採用短期的逆轉交易策略,或買入美國酒店及旅遊業過去輸家及賣出過去贏家。

研究的原創性/價值

本研究為酒店金融文獻作出貢獻,因研究為對美國酒店及旅遊業有興趣的投資者提供了使用實際收益數據及預期可創造實際回報的簡單交易規則;而且, Jegadeesh 和 Titman(1993)的動量策略從未在酒店金融文獻內被使用過。

Details

European Journal of Management and Business Economics, vol. 31 no. 3
Type: Research Article
ISSN: 2444-8451

Keywords

Open Access
Article
Publication date: 28 February 2014

Suhkyong Kim

This study investigates the deviation from put-call parity in the KOSPI200 options market. The sample period is from January 2, 2006 to May 31, 2009. Due to the financial crisis…

19

Abstract

This study investigates the deviation from put-call parity in the KOSPI200 options market. The sample period is from January 2, 2006 to May 31, 2009. Due to the financial crisis in 2008, short sale of stocks had been prohibited from October 1, 2008 to May 31, 2009. The sample is divided into the pre-crisis period and the crisis period. The crisis period is the period during which short sale of stocks are prohibited. The summary statistics shows that the trading volume of KOSPI200 stocks doubled, but the trading volume of call options and that of put options declined to one half and one third from the pre-crisis period to the crisis period, respectively. The equation which relates the deviation of futures price to the deviation of put-call parity is derived and the deviation from put-call parity is analyzed by using two stage least square. This paper looks into not only the prior 60 day return's momentum effect, but also the intraday spot return's momentum effect. Evidence indicates that the intraday momentum does exist in options and stock prices. Empirical results show that the prior 60 day return's momentum effect is statistically insignificant during the pre-crisis period, but statistically significant during the crisis period whereas the intraday return's momentum effect is strongly significant for both of the periods. This result lends support to the argument that the deviation of futures price from its theoretical price is a component of the deviation from put-call parity. The sign and significance of the regression coefficient for momentum effects are consistent with Kim and Park (2011) and Kim (2012) again lending support to the validity of their regression equation. Overall, our results are consistent with the validity of the derived equation, Kim and Park (2011) and Kim (2013)’s rationale.

Details

Journal of Derivatives and Quantitative Studies, vol. 22 no. 1
Type: Research Article
ISSN: 2713-6647

Keywords

Open Access
Article
Publication date: 31 August 2019

Kyoim Lee

This study investigates domestic individual, institutional and foreign investors’ trading, to test Hong and Stein (1999)’s behavioral explanation that momentum profit is generated…

63

Abstract

This study investigates domestic individual, institutional and foreign investors’ trading, to test Hong and Stein (1999)’s behavioral explanation that momentum profit is generated as some uninformed investors underreact to information on medium-term prices. Using Hvidkjaer (2006)’s methodology, we examine the respective investors’ trading tendencies reflected in their active price-setting orders. We analyze a special database compiling details on every transaction for the stocks listed on the KSE during 1996:12~2009:08. During 2001~2007, individual investors’ underreaction in trading large-size winner stocks contributes to positive momentum profits. They seem to induce weak negative profits to emerge in 1997~2000, too. Foreign investors underreact to small-size loser stocks, incurring positive momentum profits during 2001~2007. They engage in positive feedback trading, when they trade large-size winner stocks. This trading tendency does not seem to be based on information on firm fundamentals, as we find those winner stocks’ returns are not sustained. Institutional investors’ trading seems to be relatively in line with future returns, but evidences are not strong enough to support they are informed investors. Overall, the behavioral hypothesis on investors’ underreaction seems to explain medium-term momentum profits in Korea, but evidences differing across subsamples suggest possibility of other unknown influences.

Details

Journal of Derivatives and Quantitative Studies, vol. 27 no. 3
Type: Research Article
ISSN: 2713-6647

Keywords

Open Access
Article
Publication date: 21 January 2021

Manish Bansal, Asgar Ali and Bhawna Choudhary

The study aims at investigating the impact of real earnings management (REM) on the cross-sectional stock return after considering the moderating role of market effect, size…

7410

Abstract

Purpose

The study aims at investigating the impact of real earnings management (REM) on the cross-sectional stock return after considering the moderating role of market effect, size effect, value effect and momentum effect.

Design/methodology/approach

The study uses weekly and monthly data of 3,085 Bombay Stock Exchange listed stocks spanning over twenty years, from January 2000 to December 2019. REM is measured through metrics developed by Roychowdhury (2006), namely, abnormal levels of operating cash flows, production costs and discretionary expenditure. The study employs univariate and bivariate portfolio-level analysis.

Findings

The findings deduced from the empirical results demonstrate that investors perceive downward REM as an element of risk; hence, they discount the stock prices at a higher rate. On the contrary, results show that investors positively perceive upward REM; hence, they hold the stocks even at a lower rate of return. This anomaly is found to be robust for all kinds of considered moderations.

Practical implications

The findings have important managerial implications as investors are found to assign different weights to different forms of REM, depending upon the perception regarding the magnitude of risk involved in different forms. Managers can accommodate this information during their short- and long-term corporate planning.

Originality/value

First, the study is among the earlier attempts to examine the association between REM and stock returns by considering the moderating role of cross-sectional effects. Second, the study considers the direction and endogenous nature of REM while investigating the issue.

Details

Asian Journal of Accounting Research, vol. 6 no. 3
Type: Research Article
ISSN: 2443-4175

Keywords

Open Access
Article
Publication date: 30 July 2020

Minyeon Han, Dong-Hyun Lee and Hyoung-Goo Kang

This paper aims to replicate 148 anomalies and to examine whether the performance of the Korean market anomalies is statistically and economically significant. First, the authors…

10670

Abstract

This paper aims to replicate 148 anomalies and to examine whether the performance of the Korean market anomalies is statistically and economically significant. First, the authors observe that only 37.8% anomalies in the universe of the KOSPI and the KOSDAQ and value-weighted portfolios have t-statistics that exceed 1.96. When the authors impose a higher threshold (an absolute value of t-statistics of 2.78), only 27.7% of the 148 anomalies survive. Second, microcaps have large impacts. The results vary significantly depending on whether the sample included stocks in the KOSDAQ and whether value-weighted or equal-weighted portfolios are used. The results suggest that data mining explains large portion of abnormal returns. Any tactical asset allocation strategies based on market anomalies should be applied very cautiously.

Details

Journal of Derivatives and Quantitative Studies: 선물연구, vol. 28 no. 2
Type: Research Article
ISSN: 2713-6647

Keywords

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