Abstract

http://ssrn.com/abstract=1555240
 


 



Market States and the Profitability of Momentum Strategies: Evidence from the Taiwan Stock Exchange


Kuei-Yuan Wang


Asia University; National Taiwan University of Science and Technology

Ching-Hai Jiang


National United University

Yen-Sheng Huang


National Taiwan University of Science and Technology

2009

The International Journal of Business and Finance Research, Vol. 3, No. 1, pp. 89-102, 2009

Abstract:     
This paper examines the impact of market states on the profitability of momentum strategies using weekly data from the Taiwan Stock exchange over the 10-year period 1997-2006. Market states refer to the states of market such as up or down markets. In this paper, the formation period is defined as in an up (down) state if the market return over the six-month period prior to the holding period is nonnegative (negative). The results indicate that market states in the formation period are positively associated with the profitability of the momentum strategies. The results are consistent with the overreaction theory developed in Daniel et al. (2004). Moreover, the empirical results indicate that market states in the holding period are negatively associated with the profitability of the momentum strategies. The holding period is defined as in an up (down) state if the market return in the six-month period following the formation period is nonnegative (negative). The momentum profits appear to be higher in a bearish holding period and lower for a bullish holding period. Thus, the market states in the holding period also provide information regarding the profitability of the momentum strategies.

Number of Pages in PDF File: 14

JEL Classification: G11, G14

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Date posted: February 27, 2010  

Suggested Citation

Wang, Kuei-Yuan and Jiang, Ching-Hai and Huang, Yen-Sheng, Market States and the Profitability of Momentum Strategies: Evidence from the Taiwan Stock Exchange (2009). The International Journal of Business and Finance Research, Vol. 3, No. 1, pp. 89-102, 2009. Available at SSRN: http://ssrn.com/abstract=1555240

Contact Information

Kuei-Yuan Wang (Contact Author)
Asia University ( email )
Tokyo 180-8629
Japan
National Taiwan University of Science and Technology
Keelung Road
Sec 43
Taipei
Taiwan
Ching-Hai Jiang
National United University ( email )
MiaoLi
Taiwan
Yen-Sheng Huang
National Taiwan University of Science and Technology ( email )
Keelung Road
Sec 43
Taipei
Taiwan
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