Do Momentum Strategies Work?: - Australian Evidence
This paper investigates the profitability of momentum investment strategy and the predictive power of trading volume for equities listed in the Australian Stock Exchange. Recent research finds that momentum and trading volume appear to predict subsequent returns in U.S. market and past volume helps to reconcile intermediate-horizon “under reaction” and long-horizon “overreaction” effects. However, bulk of the evidence on this important relationship between past returns and future returns is limited to U.S. portfolios. This study provides an out of sample evidence by examining the relationship between “trading volume” (measured by the turnover ratio) and “momentum” strategies in an Australian setting. We document a strong momentum effect for the Australian market during the period 1988 through 2002 and find that momentum plays an important role in providing information about stocks. We also find that past trading volume predicts both the magnitude and persistence of price momentum. In summary, our findings are consistent with the U.S. evidence.
|Date of creation:||20 Jan 2004|
|Date of revision:|
|Contact details of provider:|| Postal: GPO Box 2434, BRISBANE QLD 4001|
Web page: http://www.bus.qut.edu.au/faculty/economics/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Robert Connolly & Chris Stivers, 2003. "Momentum and Reversals in Equity-Index Returns During Periods of Abnormal Turnover and Return Dispersion," Journal of Finance, American Finance Association, vol. 58(4), pages 1521-1556, 08.
- Tobias J. Moskowitz & Mark Grinblatt, .
"Do Industries Explain Momentum?,"
CRSP working papers
352, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Allaudeen Hameed & Yuanto Kusnadi, 2002. "Momentum Strategies: Evidence from Pacific Basin Stock Markets," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 25(3), pages 383-397.
- Conrad, Jennifer & Kaul, Gautam, 1998. "An Anatomy of Trading Strategies," Review of Financial Studies, Society for Financial Studies, vol. 11(3), pages 489-519.
- Kent Daniel & David Hirshleifer & Avanidhar Subrahmanyam, 1998. "Investor Psychology and Security Market Under- and Overreactions," Journal of Finance, American Finance Association, vol. 53(6), pages 1839-1885, December.
When requesting a correction, please mention this item's handle: RePEc:qut:dpaper:169. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Angela Fletcher)
If references are entirely missing, you can add them using this form.