Momentum and Contrarian Investment Strategies: Evidence from the Taiwan Stock Market

• Main Authors: Huj-Wen Huang, 黃慧雯
• Other Authors: Willian T. Lin
• Format: Others
• Language: zh-TW
• Published: 2001
• Online Access: http://ndltd.ncl.edu.tw/handle/61438828068280058026

碩士 === 中國文化大學 === 會計研究所 === 89 === This research uses monthly data on the common stocks listed on the Taiwan Stock Exchange Corporation and listed on the R.O.C Over-The-Counter Securities Exchange from Jan. 1978 to June 2000. It tries to discuss the return and performance at Taiwan stock market by using investment strategy following the trend or in reverse direction. Furthermore, aiming at the conclusions reached, it takes a step further to analyze whether the possible reasons are from bid-ask biased, risk compensation, investors’ un-derreaction, overreaction or other causes. The results find that the investment strategy performance is not significant based on investment strategy constituted on the basis of former returns of individual stock. The investment strategy performance constituted by former returns of industry combi-nation, however, is similar to the results reached by Moskowitz and Grinblatt (1999), that is to say, average returns of investment strategy is significantly different from zero, and all are of positive value. It indicates that relatively better investment returns can be achieved by adopting the investment strategy of industry following the trends, that is, buying industry with relatively good investment performance in the past, and at the same time, sell industry with relatively bad investment performance in the past. In the respect of sensitivity analysis, the results show that, the investment strategy performance constituted based on returns of industry combination of earlier stage was better during the period from 1989 to 2000 than from 1978 to 1988. For Taiwan stock market, it is obviously with season effect, and among them, the strategy performance of the second season is the most significant. At the same time, it is also found that the month effect of investment strategy constituted by industry combination returns is dif-ferent from ordinary documentation results, that is, there is no existence of “January Effect” in Taiwan stock market. This research also eliminated O.T.C. samples and re-established investment strat-egy by different strategy formation methods. The results indicate that, the investment strategy performance after deleting O.T.C. samples and by different strategy formation methods does not have significant differentiation from the formerly constituted invest-ment strategy performance, that is, investment returns obtained by investment strategy will not cause different results for change of information or different formation methods, which shows evidently the tenacity and stability of the above-mentioned investment strategy results. In the respect of formation reasons for investment strategy, this study results show that, the strategy performance of portfolio is indeed subject to influence by “bid-ask bi-ased”, and in terms of formation reason, high investment performance of investment strategy cannot be fully explained by risk compensation and exchange cost. Obviously, there are also other reasons, possibly from investors’ underreaction on market informa-tion or overreaction.