Testing the Profitablitiy of a Volume-Augmented Momentum Strategy in the Phillipines Equity Market

Lim Kai Jie Shawn, Darius Lim Dawei, Mak Weijie and Poh Zi En Benjamin

Journal of Applied Finance & Banking, 2013, vol. 3, issue 1, 1

Abstract: This study contributes new empirical evidence on the profitability of a momentum strategy in the Philippines equity market. The study was conducted over the time period January 2000 to June 2012. We evaluated a momentum strategy based only on past return information as well as a strategy that incorporates information on volume for 16 different time combinations with varying formation and holding periods. For the strategy based only on past return information, we find little evidence in support of the profitability of a momentum strategy with the results suggesting the presence of mean-reverting prices. When volume information is incorporated, the strategies that select stocks based on volume and return information from the past 3 months show positive average monthly returns. However, after adjusting for the risk of these strategies using a single factor model and a model with market-dependent betas we find that such a strategy does not outperform the benchmark. Hence, we conclude that there is little evidence to support the profitability of a volume-augmented momentum strategy in the Philippines equity market.

Date: 2013
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