Revisiting the momentum effect in Taiwan: The role of persistency

Hong-Yi Chen, Chia-Hsun Hsieh and Cheng-Few Lee

Pacific-Basin Finance Journal, 2023, vol. 78, issue C

Abstract: The Taiwan stock market has been widely documented as a remarkable exception to the momentum phenomenon. We show evidence that a high turnover rate exists for winner and loser portfolios, which in turn attenuates momentum profits in this market. Nevertheless, a persistency-based momentum strategy that involves buying persistent winners and short-selling persistent losers generates significant profits in the intermediate term, and thus claims a momentum effect for this market. Further analysis indicates that momentum persistency is positively associated with investors' heterogeneous beliefs. Finally, the persistency-based momentum strategy is robustly profitable for international markets, especially those without the momentum effect.

Keywords: Momentum persistency; Underreaction; Heterogeneous beliefs; Taiwan stock market (search for similar items in EconPapers)
JEL-codes: G11 G14 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:78:y:2023:i:c:s0927538x23000094

DOI: 10.1016/j.pacfin.2023.101943

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