Momentum Decomposition: Evidence from Emerging Markets

Hongbo Guo and Xianhua Wei

Asian Economic and Financial Review, 2017, vol. 7, issue 2, 123-132

Abstract: To explain the reason why momentum effect in emerging markets is much weaker than that in developed markets. We divide the traditional momentum returns into intra-style momentum and inter-style momentum effect on the basis of style investing. According to the result, intra-style momentum effect spreads widely in all of the twelve emerging markets, as the primary driving factor for the overall momentum effect. Besides, the inter-style momentum strategy has distinct property in all kinds of markets, leading to the poor performance of momentum strategy in some markets. It is also discovered in the cross-section regression that in emerging markets, the style-adjusted firm-specific return is in evidently positive correlation with the future stock return, but the relationship between the style return and future stock return is uncertain.

Keywords: Momentum effect; Style investing; Firm-specific momentum; Stock returns; Emerging market; Return decomposition. (search for similar items in EconPapers)
Date: 2017
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