Although momentum strategies result in abnormal profitability,thereby challenging the efficient market hypothesis(EMH),concerns persist regarding their reliability due to their significant volatility and susceptibilit...Although momentum strategies result in abnormal profitability,thereby challenging the efficient market hypothesis(EMH),concerns persist regarding their reliability due to their significant volatility and susceptibility to substantial losses.In this study,we investigate the limitations of these strategies and propose a solution.Our literature review reveals that the volatile profits are due to statistical analyses that assume the persistence of past patterns,leading to unreliable results in out-of-sample scenarios when underlying mechanisms evolve.Statistical analysis,the predominant method in financial economics,often proves inadequate in explaining market fluctuations and predicting crashes.To overcome these limitations,a paradigm shift towards dynamic approaches is essential.Drawing inspiration from three groundbreaking economists,we introduce the extended Samuelson model(ESM),a dynamic model that connects price changes to market participant actions.This paradigm transition uncovers several significant findings.First,timely signals indicate momentum initiations,cessations,and reversals,validated using S&P 500 data from 1999 to 2023.Second,ESM predicts the 1987 Black Monday crash weeks in advance,offering a new perspective on its underlying cause.Third,we classify sequential stock price data into eight distinct market states,including their thresholds for transitions,laying the groundwork for market trend predictions and risk assessments.Fourth,the ESM is shown to be a compelling alternative to EMH,offering potent explanatory and predictive power based on a single,realistic assumption.Our findings suggest that ESM has the potential to provide policymakers with proactive tools,enabling financial institutions to enhance their risk assessment and management strategies.展开更多
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...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.展开更多
The idea of this study is derived from observing the profitability of stock investments following the phenomena of continuously rising(or falling)prices of stocks and continuously overbought(or oversold)signals emitte...The idea of this study is derived from observing the profitability of stock investments following the phenomena of continuously rising(or falling)prices of stocks and continuously overbought(or oversold)signals emitted by technical indicators.We employ the standard event study approach and technical trading strategies to explore whether investors would exploit profits in trading the constituent stocks of the Korea Composite Stock Price Index 50 and Shanghai Stock Exchange 50 when the aforementioned continuous phenomena occur.We find that both the Korean and Chinese stock markets are not fully efficient;this finding may enhance the robustness of the existing literature.In addition,we reveal that contrarian strategies are appropriate for the trading stocks listed on the Korean stock market for all the cases investigated in this study.However,momentum strategies are appropriate for the Chinese stock market when continuously rising stock prices and overbought signals are simultaneously observed.These findings imply that the difference in investor behaviors between the Korean and Chinese stock markets might result in dissimilar trading strategies being employed for these two markets.展开更多
文摘Although momentum strategies result in abnormal profitability,thereby challenging the efficient market hypothesis(EMH),concerns persist regarding their reliability due to their significant volatility and susceptibility to substantial losses.In this study,we investigate the limitations of these strategies and propose a solution.Our literature review reveals that the volatile profits are due to statistical analyses that assume the persistence of past patterns,leading to unreliable results in out-of-sample scenarios when underlying mechanisms evolve.Statistical analysis,the predominant method in financial economics,often proves inadequate in explaining market fluctuations and predicting crashes.To overcome these limitations,a paradigm shift towards dynamic approaches is essential.Drawing inspiration from three groundbreaking economists,we introduce the extended Samuelson model(ESM),a dynamic model that connects price changes to market participant actions.This paradigm transition uncovers several significant findings.First,timely signals indicate momentum initiations,cessations,and reversals,validated using S&P 500 data from 1999 to 2023.Second,ESM predicts the 1987 Black Monday crash weeks in advance,offering a new perspective on its underlying cause.Third,we classify sequential stock price data into eight distinct market states,including their thresholds for transitions,laying the groundwork for market trend predictions and risk assessments.Fourth,the ESM is shown to be a compelling alternative to EMH,offering potent explanatory and predictive power based on a single,realistic assumption.Our findings suggest that ESM has the potential to provide policymakers with proactive tools,enabling financial institutions to enhance their risk assessment and management strategies.
基金supported by Xiamen University Malaysia Research Fund(Grant No:XMUMRF/2019-C3/ISEM/0016).
文摘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.
文摘The idea of this study is derived from observing the profitability of stock investments following the phenomena of continuously rising(or falling)prices of stocks and continuously overbought(or oversold)signals emitted by technical indicators.We employ the standard event study approach and technical trading strategies to explore whether investors would exploit profits in trading the constituent stocks of the Korea Composite Stock Price Index 50 and Shanghai Stock Exchange 50 when the aforementioned continuous phenomena occur.We find that both the Korean and Chinese stock markets are not fully efficient;this finding may enhance the robustness of the existing literature.In addition,we reveal that contrarian strategies are appropriate for the trading stocks listed on the Korean stock market for all the cases investigated in this study.However,momentum strategies are appropriate for the Chinese stock market when continuously rising stock prices and overbought signals are simultaneously observed.These findings imply that the difference in investor behaviors between the Korean and Chinese stock markets might result in dissimilar trading strategies being employed for these two markets.
