EconPapers    
Economics at your fingertips  
 

Co-existence of short-term reversals and momentum in the Australian equity market

Daniel Chai and Binh Do

Australian Journal of Management, 2016, vol. 41, issue 1, 55-76

Abstract: Small stocks tend to reverse, whereas large stocks tend to trend over a one-month horizon, which explains the lack of short-term reversals in the Australian market as a whole. However, large stocks exhibit intra-industry reversals, in which industry winners underperform industry losers in the subsequent month, when controlling for price momentum. Conversely, once this intra-industry reversal is neutralised, large stocks display momentum behaviour, in which market winners outperform market losers. These conditional strategies generate positive, significant risk-adjusted returns on large stocks in Australia. This paper documents significant industry momentum, as winning industries outperform losing industries in the following month. This industry momentum effect dominates the intra-industry reversal. The paper also finds evidence that conditional reversals are driven by illiquidity and are inhibited by stock prices under-reacting to earnings announcements.

Keywords: Industry momentum; liquidity; momentum; short-term reversals (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://journals.sagepub.com/doi/10.1177/0312896214535789 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sae:ausman:v:41:y:2016:i:1:p:55-76

DOI: 10.1177/0312896214535789

Access Statistics for this article

More articles in Australian Journal of Management from Australian School of Business
Bibliographic data for series maintained by SAGE Publications ().

 
Page updated 2025-03-19
Handle: RePEc:sae:ausman:v:41:y:2016:i:1:p:55-76