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Impact of ownership concentration, industry and liquidity factors on momentum effect in Malaysia and Australia

It is well documented that momentum strategies are profitable and significant in developed markets. By contrast, emerging market momentum evidence is found to be inconclusive. This suggests a continued need for further exploration in the research area, and underscores the possibility that some un...

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Main Author: Tan, Yeng May
Format: Thesis
Language:English
Published: 2015
Online Access:http://psasir.upm.edu.my/id/eprint/68178/1/GSM%202015%2015%20IR.pdf
http://psasir.upm.edu.my/id/eprint/68178/
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spelling my.upm.eprints.681782019-05-10T01:06:00Z http://psasir.upm.edu.my/id/eprint/68178/ Impact of ownership concentration, industry and liquidity factors on momentum effect in Malaysia and Australia Tan, Yeng May It is well documented that momentum strategies are profitable and significant in developed markets. By contrast, emerging market momentum evidence is found to be inconclusive. This suggests a continued need for further exploration in the research area, and underscores the possibility that some underlying attributes fundamental to the Asian and emerging markets could be responsible for this disparity. The current study examines a few aspects of momentum investment strategy using data from two qualitatively distinct markets of the Asia-Pacific region – Malaysia and Australia. The employment of these two databases helps shed different light on the performances of momentum investment strategies in these markets and how factors ubiquitous to the emerging markets are possibly linked to the momentum effect. The study employs more than 700 stocks for each market and conducts analyses across the study period spanning from 1995 to 2013. Overall, this study finds evidence of momentum returns in both markets, although evidence in Malaysia is less pronounced and of shorter term nature. In Australia, momentum portfolios are significantly profitable in the short and intermediate terms. In addition to covering a full sample period, targeted examination is also conducted over the 1997 Asian crisis and 2006 global crisis sub-periods to evaluate the impact of severe crisis on momentum profitability. The results are consistent with the prediction of weaker or negative momentum during periods of severe economic downturn. In addition to stock-level momentum, this study also finds strong evidence of industry momentum for both the Malaysian and Australian equity market. Further analysis of industry-neutral momentum portfolios offers indication that industry component can be a determining factor of stock momentum. Motivated by the lack of evidence of an association between ownership concentration and momentum effect, the study examines the potential linkage between ownership concentration and momentum. The results show that ownership concentration is an attributing factor of stock momentum in Malaysia, but finds no such compelling evidence in Australia. The Malaysian evidence is consistent with the notion that information uncertainty associated with concentrated ownership leads to more synchronous price movements. This is in line with the unique institutional and corporate structure of Malaysia. By implementing momentum strategies on liquidityconscious sub-samples, the study further shows that bid-ask spread can predict the strength and persistence of return continuation for both markets. The finding of this analysis thus validates the conjecture that liquidity plays a determining role in momentum, and it shed light on the relation between liquidity and momentum returns in the emerging market context. 2015-09 Thesis NonPeerReviewed text en http://psasir.upm.edu.my/id/eprint/68178/1/GSM%202015%2015%20IR.pdf Tan, Yeng May (2015) Impact of ownership concentration, industry and liquidity factors on momentum effect in Malaysia and Australia. PhD thesis, Universiti Putra Malaysia.
institution Universiti Putra Malaysia
building UPM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Putra Malaysia
content_source UPM Institutional Repository
url_provider http://psasir.upm.edu.my/
language English
description It is well documented that momentum strategies are profitable and significant in developed markets. By contrast, emerging market momentum evidence is found to be inconclusive. This suggests a continued need for further exploration in the research area, and underscores the possibility that some underlying attributes fundamental to the Asian and emerging markets could be responsible for this disparity. The current study examines a few aspects of momentum investment strategy using data from two qualitatively distinct markets of the Asia-Pacific region – Malaysia and Australia. The employment of these two databases helps shed different light on the performances of momentum investment strategies in these markets and how factors ubiquitous to the emerging markets are possibly linked to the momentum effect. The study employs more than 700 stocks for each market and conducts analyses across the study period spanning from 1995 to 2013. Overall, this study finds evidence of momentum returns in both markets, although evidence in Malaysia is less pronounced and of shorter term nature. In Australia, momentum portfolios are significantly profitable in the short and intermediate terms. In addition to covering a full sample period, targeted examination is also conducted over the 1997 Asian crisis and 2006 global crisis sub-periods to evaluate the impact of severe crisis on momentum profitability. The results are consistent with the prediction of weaker or negative momentum during periods of severe economic downturn. In addition to stock-level momentum, this study also finds strong evidence of industry momentum for both the Malaysian and Australian equity market. Further analysis of industry-neutral momentum portfolios offers indication that industry component can be a determining factor of stock momentum. Motivated by the lack of evidence of an association between ownership concentration and momentum effect, the study examines the potential linkage between ownership concentration and momentum. The results show that ownership concentration is an attributing factor of stock momentum in Malaysia, but finds no such compelling evidence in Australia. The Malaysian evidence is consistent with the notion that information uncertainty associated with concentrated ownership leads to more synchronous price movements. This is in line with the unique institutional and corporate structure of Malaysia. By implementing momentum strategies on liquidityconscious sub-samples, the study further shows that bid-ask spread can predict the strength and persistence of return continuation for both markets. The finding of this analysis thus validates the conjecture that liquidity plays a determining role in momentum, and it shed light on the relation between liquidity and momentum returns in the emerging market context.
format Thesis
author Tan, Yeng May
spellingShingle Tan, Yeng May
Impact of ownership concentration, industry and liquidity factors on momentum effect in Malaysia and Australia
author_facet Tan, Yeng May
author_sort Tan, Yeng May
title Impact of ownership concentration, industry and liquidity factors on momentum effect in Malaysia and Australia
title_short Impact of ownership concentration, industry and liquidity factors on momentum effect in Malaysia and Australia
title_full Impact of ownership concentration, industry and liquidity factors on momentum effect in Malaysia and Australia
title_fullStr Impact of ownership concentration, industry and liquidity factors on momentum effect in Malaysia and Australia
title_full_unstemmed Impact of ownership concentration, industry and liquidity factors on momentum effect in Malaysia and Australia
title_sort impact of ownership concentration, industry and liquidity factors on momentum effect in malaysia and australia
publishDate 2015
url http://psasir.upm.edu.my/id/eprint/68178/1/GSM%202015%2015%20IR.pdf
http://psasir.upm.edu.my/id/eprint/68178/
_version_ 1643839124197605376
score 13.211869

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