Technical, Fundamental, and Combined Information for Separating Winners from Losers

52 Pages Posted: 16 Apr 2010 Last revised: 29 Jul 2016

See all articles by Hong-Yi Chen

Hong-Yi Chen

National Chengchi University - Department of Finance

Cheng-Few Lee

Rutgers University, Newark, School of Business-Newark, Department of Finance & Economics

Wei-Kang Shih

Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick

Date Written: September 21, 2015

Abstract

This study examines how fundamental accounting information can be used to supplement technical information to separate momentum winners from losers. We first introduce a ratio of liquidity buy volume to liquidity sell volume (BOS ratio) to proxy the level of information asymmetry for stocks and show that the BOS momentum strategy can enhance the profits of momentum strategy. We further propose a unified framework, produced by incorporating two fundamental indicators — the FSCORE (Piotroski, 2000) and the GSCORE (Mohanram, 2005) — into momentum strategy. Empirical results show that the combined investment strategy includes stocks with larger information content that the market cannot reflect in time, and therefore, the combined investment strategy outperforms momentum strategy by generating significantly higher returns.

Keywords: BOS ratio; Combined investment strategy; Financial statement analysis; Fundamental analysis; Momentum strategies; Technical analysis; Trading volume

JEL Classification: M41, G11, G12, G14

Suggested Citation

Chen, Hong-Yi and Lee, Cheng-Few and Shih, Wei-Kang, Technical, Fundamental, and Combined Information for Separating Winners from Losers (September 21, 2015). Pacific-Basin Finance Journal, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1590460 or http://dx.doi.org/10.2139/ssrn.1590460

Hong-Yi Chen

National Chengchi University - Department of Finance ( email )

No. 64, Chih-Nan Road
Section 2
Wenshan, Taipei, 11623
Taiwan

Cheng-Few Lee

Rutgers University, Newark, School of Business-Newark, Department of Finance & Economics ( email )

111 Washington Avenue
Newark, NJ 07102
United States
732-445-3907 (Phone)
732-445-5927 (Fax)

Wei-Kang Shih (Contact Author)

Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick ( email )

Janice H. Levin Bldg., Room 121
94 Rockafeller Road
Piscataway, NJ 08854-8054
United States

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