Momentum Effect and Economic Cycle in Taiwan
Date Issued
2016
Date
2016
Author(s)
Jhao, Siang-Heng
Abstract
Momentum effect in stock markets indicated that buying stocks with high past return and selling those with poor past performance can generate abnormal return. It has been found that momentum investment strategy can generate abnormal return in USA and European stock markets. However, momentum effect is weak, inexistent and even negative in some emerging markets, according to some researches. Momentum effect could be strong or weak through time, and the momentum effect may stem from under-reaction to prices or some cognitive biases. Those causes could be further attributed to investors’ sentiment. As a result, the magnitude of momentum effect could be affected by the market sentiment. The purpose of this thesis is to examine the relationship between market sentiment and momentum effect in Taiwan stock market, and link the economic cycle with the magnitude of momentum effect. The result shows that momentum effect could vary with the time and the economic cycle. The momentum effect tends to be stronger when market is bullish and disappear when market is bearish.
Subjects
Fama-Macbeth Regression,
Momentum Effect
Time Series
Long-Short Portfolio
Economic Cycle
Market Sentiment
Taiwan Stock Market
Type
thesis
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ntu-105-R03723024-1.pdf
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