Momentum returns in Australian equities: The influences of size,risk, liquidity and return computation |
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| Institution: | 1. Yale School of Management, New Haven, CT, USA;2. Isenberg School of Management, University of Massachusetts Amherst, Amherst, MA, USA;1. Gabelli School of Business, Fordham University, 45 Columbus Avenue, New York, NY 10023;2. Gabelli School of Business, Fordham University, 113 West 60th Street, New York, NY 10023;1. School of Management, Xiamen University, Xiamen, China;2. Department of Banking and Finance, National Chi Nan University, Puli, Taiwan;3. Department of Finance, Asia University, Taichung, Taiwan |
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| Abstract: | The apparent predictability of stock prices, and the related profitability of investment strategies based on this, has generated a great deal of research. Since the late 1980s, momentum strategies have attracted considerable attention and have been found to be profitable in numerous markets. This paper investigates the returns to short-term and intermediate-horizon momentum strategies in the Australian equity market. We focus on ‘practical’ or ‘realistic’ investment strategies, and find that momentum is prevalent in the Australian market and that the returns are of greater magnitude than previously found in overseas markets. These momentum strategy returns are robust to risk adjustment and prevail over time. We also examine the interaction of momentum on size and liquidity variables and conclude that the observed profits to these investment strategies are not explained by size or liquidity differences among the stocks. |
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