Decomposing the Momentum in the Japanese Stock Market

Yasuhiro Iwanaga (), Takehide Hirose () and Tomohiro Yoshida ()
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Yasuhiro Iwanaga: Hakuoh University
Takehide Hirose: Sumitomo Mitsui DS Asset Management Company, Limited
Tomohiro Yoshida: Nissay Asset Management Corporation

Asia-Pacific Financial Markets, 2024, vol. 31, issue 2, No 2, 250 pages

Abstract: Abstract In this study, we decompose momentum indicators for the Japanese stock market into two components, high-to-price and price-to-high. High-to-price has a lower downside risk and higher Sharpe ratio than price-to-high. We find that a conventional momentum strategy combines the characteristics of high-to-price in a bull market and those of price-to-high in a bear market. In particular, the large drawdowns of momentum strategies reported in previous studies seem to be largely owed to those of price-to-high in bear markets. It is possible that the mechanism generating factor returns differs among the three strategies.

Keywords: Momentum; Decomposition; Behavioral finance; Japan (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10690-023-09413-y

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