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Industry- and liquidity-based momentum in Australian equities

Author

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  • Yeng May Tan

    (Xiamen University Malaysia)

  • Fan Fah Cheng

    (Faculty of Economics and Management, Universiti Putra Malaysia)

Abstract

This study examined momentum profitability in Australia, providing further evidence for intermediate-term momentum profitability. Using data spanning different market states, we found that momentum was stronger after the global financial crisis. We also examined industry-level momentum strategies and found strong evidence for industry momentum. Specifically, industries that perform well relative to other industries continue to outperform others while those that underperform continue to perform poorly. This finding suggests the exploitability of return continuation and profit-making opportunities for traders at the industry level. Regarding liquidity, we found that it has no clear predictive power for momentum returns. Hence, our results do not appear to support the conjecture that liquidity can be a determining factor for momentum profitability in Australia.

Suggested Citation

  • Yeng May Tan & Fan Fah Cheng, 2019. "Industry- and liquidity-based momentum in Australian equities," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 5(1), pages 1-18, December.
    • Handle: RePEc:spr:fininn:v:5:y:2019:i:1:d:10.1186_s40854-019-0155-z
    DOI: 10.1186/s40854-019-0155-z
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    1. Wen, Fenghua & Zou, Qian & Wang, Xiong, 2021. "The contrarian strategy of institutional investors in Chinese stock market," Finance Research Letters, Elsevier, vol. 41(C).

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