Momentum, Legal Systems and Ownership Structure: An Analysis of Asian Stock Markets

47 Pages Posted: 25 Apr 2001

See all articles by Andy C.W. Chui

Andy C.W. Chui

Hong Kong Polytechnic University

K.C. John Wei

Hong Kong Polytechnic University

Sheridan Titman

University of Texas at Austin - Department of Finance; National Bureau of Economic Research (NBER)

Date Written: December 2000

Abstract

This paper examines momentum profits in eight Asian markets with a focus on ownership structure, legal systems and valuation uncertainty. The results indicate that momentum strategies, which buy past winners and sell past losers, are highly profitable when implemented on Asian stock markets outside Japan. Interestingly, the common law/civil law distinction provides a perfect indicator of whether or not a market exhibited a momentum effect prior to the financial crisis. Consistent with the previous findings in the U.S., we document that the momentum effect is relatively stronger for firms with smaller market capitalizations, lower book-to-market ratios, and higher turnover ratios. In addition, we document that the momentum effect is stronger for independent firms than for group-affiliated firms and present weak evidence that suggests that foreign ownership can influence the momentum effect in Japanese firms. We also find return reversals around nine or ten months after the portfolio formation date, which supports the prediction of some behavioral models.

Keywords: Momentum, legal systems, ownership structure, Asian stock markets

JEL Classification: F3, G1

Suggested Citation

Chui, Andy Chun Wai and Wei, Kuo-Chiang (John) and Titman, Sheridan, Momentum, Legal Systems and Ownership Structure: An Analysis of Asian Stock Markets (December 2000). Available at SSRN: https://ssrn.com/abstract=265848 or http://dx.doi.org/10.2139/ssrn.265848

Andy Chun Wai Chui (Contact Author)

Hong Kong Polytechnic University ( email )

M808, Li Ka Shing Tower
Hung Hom, Kowloon, Kowloon
Hong Kong
(852)2766 7105 (Phone)
(852)2356 9550 (Fax)

Kuo-Chiang (John) Wei

Hong Kong Polytechnic University ( email )

11 Yuk Choi Rd
Hung Hom
Hong Kong

Sheridan Titman

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-232-2787 (Phone)
512-471-5073 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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