Sources of Industry Momentum Effect - Weekly Data Evidence

Hai-Ching Liu and Ying-Fen Fu ()
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Hai-Ching Liu: Department of Finance, Southern Taiwan University of Technology, Taiwan
Ying-Fen Fu: Department of Finance, Tainan University of Technology, Taiwan

Journal of Economics and Management, 2011, vol. 7, issue 1, 23-42

Abstract: This study employs industry weekly return data for Taiwan in order to investigate the industry momentum profit sources of an emerging country. It differs from past studies (e.g., Pan et al., 2004 and Du, 2008), which adopted weekly data to observe the industry momentum sources with a short horizon, in that it investigates the industry momentum sources with a long horizon as well as a short horizon. The results show that there exists a significant industry reversal effect in Taiwan, which indicates that investors in Taiwan exhibit behavior characterized by overreaction but not underreaction. After dividing the industry momentum sources into cross-autocovariances among industries, own-autocovariances for each individual industry and cross-sectional variation in mean returns, we find that the sources of the short-horizon industry momentum effect in Taiwan mainly come from the negative industry own-autocorrelation returns. The main source of the long-horizon industry momentum effect is the cross-autocovariance before 2002, while the own-autocovariance is the driving force after 2002.

Keywords: industry momentum; autocovariances; momentum profit sources (search for similar items in EconPapers)
JEL-codes: G10 G11 (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:jec:journl:v:7:y:2011:i:1:p:23-42

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