Does Momentum Help Explain the Expected Returns of Taiwan Stocks? Residual Momentum vs Recent 52-Week Momentum

Abstract

We examine the profitability of the residual momentum strategy and the recent 52-week momentum strategy in Taiwan based on a monthly return calculation basis from every end of each calendar month to the tenth day of each calendar month and examine that there is whether any dominance between two strategies In addition we modify the sample selection of the value investing strategy used in Yu (2012) to reexamine the profitability Finally we follow the residual momentum strategy plus the value investing strategy proposed by Lu (2013) and prolong the sample period to examine the joint effects on profits Previous papers explore the momentum strategy by using Jegadeesh and Titman's (1993) total return momentum In this research we follow the residual momentum strategy proposed by Blitz et al (2011) and the 52-week momentum strategy proposed by Bhootra and Hur (2013) and use zero-cost investment strategy to construct the investment portfolio The results confirm that there is no much evidence about the dominance between the residual momentum strategy and the recent 52-week momentum The Fama-French alphas of two strategies are significant We also find that profitability of the value investing strategy with modification is significantly higher Finally the joint strategy of the momentum strategy plus the value strategy still generates significantly abnormal returns

Date of Award	2015 Jul 22
Original language	English
Supervisor	Meng-Feng Yen (Supervisor)