Return-Based Investment Strategies in the New Zealand Stock Market: Momentum Wins

Pacific Accounting Review, 2007, Vol 19, No 2, 108-124.

27 Pages Posted: 20 Aug 2007 Last revised: 11 May 2016

See all articles by Hung Wan Kot

Hung Wan Kot

University of Macau - Department of Finance and Business Economics

Abstract

The purpose of this study is to examine the profitability of return-based investment strategies in the New Zealand stock market; sixteen such strategies are examined for the period from January 1995 to December 2004. The results show that a strong momentum effect, rather than a reversal effect, is present in this market. For example, the strategy which is based on a six-month portfolio formation period and a six-month holding period generates a monthly return of 1.14 per cent. These strategies are most profitable when they are based on formation and holding periods of three-to-six months. Further analyses reveal that the profits generated by such investment strategies cannot be explained by either the small firm effect or the January effect.

Keywords: Momentum effect, New Zealand market

JEL Classification: G11, G14

Suggested Citation

Kot, Hung Wan, Return-Based Investment Strategies in the New Zealand Stock Market: Momentum Wins. Pacific Accounting Review, 2007, Vol 19, No 2, 108-124.. Available at SSRN: https://ssrn.com/abstract=1007982

Hung Wan Kot (Contact Author)

University of Macau - Department of Finance and Business Economics ( email )

Macau

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