Please use this identifier to cite or link to this item: http://scholarbank.nus.edu.sg/handle/10635/147653
Title: CROSS-ASSET MOMENTUM AND REVERSAL: WITHIN INDUSTRY ANALYSIS
Authors: LI ANG
Issue Date: 2012
Citation: LI ANG (2012). CROSS-ASSET MOMENTUM AND REVERSAL: WITHIN INDUSTRY ANALYSIS. ScholarBank@NUS Repository.
Abstract: This thesis documents the strong intra-industry cross-asset short-term momentum and long-term reversal among industry leaders and followers stocks1 . During the period from 1965 to 2009, stocks are classified into 24 industries based on the GIC Group code and grouped into industry leaders and industry followers based on the level of information transparency proxied by their market capitalization and institutional ownership. Strategies which buy followers stocks whose corresponding industry leaders performed well in the past and sell followers stocks whose corresponding industry leaders performed poorly in the past generate significant positive returns within 12 months after the portfolio formation. However, such positive returns are gradually eroded by the negative performance in the second and third years of the holding period. The cross-asset short-term momentum and long-term reversal remain robust even after controlling for industry momentum and individual momentum. These findings suggest an information spill-over effect within industries whereby less information transparent stocks (industry followers stocks) are traded upon the past performance of more information transparent stocks (industry leaders stocks) within the same industry. The profitability of the strategy isnot due to the systematic risks as the positive returns remain prominent and statistically significant after being adjusted for Fama French factors. Moreover, the strategy returns disappear in the long term (24 to 36 months) which suggests that the abnormal returns in the short term (less than 12 months) do not represent risk premium and are not justified by value-relevant information spill-over, which possibly reflects overreaction. It is also observed that these self-financed strategies generate higher and more statistically significant returns in recent years.
URI: http://scholarbank.nus.edu.sg/handle/10635/147653
Appears in Collections:Bachelor's Theses

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