Delisted stocks and momentum: Evidence from a new Australian dataset

Thanh Huynh and Daniel Smith ()

Australian Journal of Management, 2017, vol. 42, issue 1, 140-160

Abstract: We explore the impact of delisting on the performance of the momentum trading strategy in Australia. We employ a new dataset of hand-collected delisting returns for all Australian stocks and provide the first study outside the U.S. to jointly examine the effects of delisting and missing returns on the magnitude of momentum profits. In the sample of all stocks, we find that the profitability of momentum strategies depends crucially on the returns of delisted stocks, especially on bankrupt firms. In the sample of large stocks, however, the momentum effect remains strong after controlling for the effect of delisted stocks, in contrast to the U.S. evidence in which delisting returns can explain 40% of momentum profits. As these large stocks are less exposed to liquidity risks, the momentum effect in Australia is even more puzzling than in the U.S.

Keywords: Momentum; delisting (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:ausman:v:42:y:2017:i:1:p:140-160

DOI: 10.1177/0312896214565118

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