INVESTMENT BASED ON SIZE, VALUE, MOMENTUM AND INCOME MEASURES: A STUDY IN THE TAIWAN STOCK MARKET

Richard Lu, Jai-Jen Wang () and Wing-Keung Wong
Additional contact information
Richard Lu: Department of Risk Management and Insurance, Feng Chia University, Taiwan
Jai-Jen Wang: Department of Finance, Feng Chia University, Taiwan
Wing-Keung Wong: Department of Finance, Fintech & Blockchain Research Center and Big Data Research Center, Asia University, Taiwan4Department of Medical Research, China Medical University, Taiwan5Department of Economics and Finance, The Hang Seng University of Hong Kong, Hong Kong

Annals of Financial Economics (AFE), 2022, vol. 17, issue 04, 1-33

Abstract: Cross-sectional characteristics of stocks such as market value, market-to-book ratio and accumulated past return can be applied to formulate equity portfolios in the stock-picking process to generate good profits in some markets, which relate to the well-known size, value and momentum or contrarian strategies in the literature. Alternatively, income measures in financial statements drive investors in stock markets to buy or sell in an intuitive way that can be also used in the stock-picking process to generate good profits in some markets. This study applies these types of information in the formation period to formulate long-short strategies and investigates both the returns and risk profiles in the holding period afterward and checks whether the measures can be used to generate good profits in the Taiwan markets for the period from January 1980 to June 2020. Given different lengths of the holding period and different equity segments, our empirical analysis shows that strategies filtered by the income measure of gross profitability outperform the counterparts filtered by the operating profitability. Moreover, while the momentum or contrarian effect is not, the size and value effects are helpful to improve the performance of long-short strategies filtered by gross profitability.

Keywords: Operating profitability; gross profitability; size; value; momentum; contrarian; long-short strategy (search for similar items in EconPapers)
JEL-codes: G10 G12 G14 (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S2010495222500270
Access to full text is restricted to subscribers

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:wsi:afexxx:v:17:y:2022:i:04:n:s2010495222500270

Ordering information: This journal article can be ordered from

DOI: 10.1142/S2010495222500270

Access Statistics for this article

Annals of Financial Economics (AFE) is currently edited by Michael McAleer

More articles in Annals of Financial Economics (AFE) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().