Commenced in January 2007
Paper Count: 30127
The Study on the Relationship between Momentum Profits and Psychological Factors: Evidence from Taiwan
Authors: Chih-Hsiang Chang
Abstract:This study provides insight into the effects of investor sentiment, excess optimism, overconfidence, the disposition effect, and herding formation on momentum profits. This study contributes to the field by providing a further examination of the relationship between psychological factors and momentum profits. The empirical results show that there is no evidence of significant momentum profits in Taiwan’s stock market. Additionally, investor sentiment in Taiwan’s stock market significantly influences its momentum profits.
Digital Object Identifier (DOI): doi.org/10.5281/zenodo.1126880Procedia APA BibTeX Chicago EndNote Harvard JSON MLA RIS XML ISO 690 PDF Downloads 769
 N. Jegadeesh and S. Titman, “Returns to buying winners and selling losers: Implications for stock market efficiency,” Journal of Finance, vol. 48, pp. 65-91, 1993.
 L. K. Chan, N. Jegadeesh, and J. Lakonishok, “Momentum strategies,” Journal of Finance, vol. 51, 1pp. 681-1713, 1996.
 C. S. Asness, T. J. Moskowitz, and L. H. Pedersen, “Value and momentum everywhere,” Journal of Finance, vol. 68, pp. 929-985, 2013.
 T. Chordia and L. Shivakumar, “Momentum, business cycle and time-varying expected return,” Journal of Finance, vol. 57, pp. 985-1019, 2002.
 A. C. W. Chui, S. Titman, and K. C. J. Wei, “Individualism and momentum around the world,” Journal of Finance, vol. 65, pp. 361-392, 2010.
 E. C. Galariots, P. Holmes, V. Kallinterakis, and X. S. Ma, “Market states, expectations, sentiment and momentum: How naïve are investors?” International Review of Financial Analysis, vol. 32, pp. 1-12, 2014.
 M. Q. Mao and K. C. J. Wei, “Price and earnings momentum: An explanation using decomposition,” Journal of Empirical Finance, vol. 28, pp. 332-351, 2014.
 M. T. Bohl, M.-G. Czaja, and P. Kaufmann, “Momentum profits, market cycles, and rebounds: Evidence from Germany,” Quarterly Review of Economics and Finance, vol. 61, pp. 139-159, 2016.
 K. Daniel, D. Hirshleifer, and A. Subrahmanyam, “Investor psychology and security market under-and overreactions,” Journal of Finance, vol. 53, pp. 1839-1886, 2001.
 E. Vallelado, B. Fernandez, T. G. Merino, R. Mayoral, and V. S. Alvarez, “Herding, information uncertainty and investors’ cognitive profile,” Qualitative Research in Financial Markets, vol. 3, pp. 7-33, 2011.
 Y.-L. Hsu and E. H. Chow, “The house money effect on investment risk taking: Evidence from Taiwan,” Pacific-Basin Finance Journal, vol. 21, pp. 1102-1115, 2013.
 C.-H. Chang and S.-J. Lin, “The effects of national culture and behavioral pitfalls on investors’ decision-making: Herding behavior in international stock markets,” International Review of Economics and Finance, vol. 37, pp. 380-392, 2015.
 M. Cremers and A. Pareek, “Short-term trading and stock return anomalies: momentum, reversal, and share issuance,” Review of Finance, vol. 19, pp. 1649-1701, 2015.
 C.-H. Chang, S.-S. Chen, and S.-L. Hsieh, “Asymmetric reinforcement learning and conditioned responses during the 2007–2009 global financial crisis: Evidence from Taiwan,” Review of Pacific Basin Financial Markets and Policies, Article in Press, 2016.
 G. W. Brown and M. T. Cliff, “Investor sentiment and the near-term stock market,” Journal of Empirical Finance, vol. 11, pp. 1-27, 2004.
 M. Schmeling, “Investor sentiment and stock returns: Some international evidence,” Journal of Empirical Finance, vol. 16, pp. 394-408, 2009.
 A. Kumar, J. K. Page, and O. G. Spalt, “Investor sentiment and return comovements: Evidence from stock splits and headquarters changes,” Review of Finance, vol. 17, pp. 921-953, 2013.
 J. Danbolt, A. Siganos, and E. Vagenas-Nanos, “Investor sentiment and bidder announcement abnormal returns,” Journal of Corporate Finance, vol. 33, pp. 164-179, 2015.
 C.-Y. Yang, L.-J. Jhang, and C.-C. Chang, “Do investor sentiment, weather and catastrophe effects improve hedging performance? Evidence from the Taiwan options market,” Pacific-Basin Finance, vol. 37, pp. 35-51, 2016.
 C. Chang, “Herding, and the role of foreign institutions in emerging equity markets,” Pacific-Basin Finance Journal, vol. 28, pp. 175-185, 2010.
 I. Venezia, A. Nashikkar, and Z. Shapira, Z., “Firm specific and macro herding by professor and amateur investors and their effects on market volatility,” Journal of Banking & Finance, vol. 35, pp. 1599-1609, 2011.
 M. Grinblatt, S. Titman, and R. Wermers, R., “Momentum investment strategies, portfolio performance, and herding: A study of mutual fund behavior,” American Economic Review, vol. 85, pp. 1088-1105, 1995.
 N. Choi and R. W. Sias, “Institutional industry herding,” Journal of Financial Economics, vol. 94, pp. 469-491, 2009.
 Z. Yan, Y. Zhao, and L. Sun, “Industry herding and momentum,” Journal of Investing, vol. 21, pp. 89-96, 2012.
 R. Demirer, D. Lien, and H. Zhang, “Industry herding and momentum strategies,” Pacific-Basin Finance Journal, vol. 32, pp. 95-110, 2015.
 E. F. Fama and K. R. French, “Multifactor explanations of asset pricing anomalies,” Journal of Finance, vol. 51, pp. 55-84, 1996.
 T. C. Chiang and D. Zheng, “An empirical analysis of herd behavior in global stock markets,” Journal of Banking & Finance, vol. 34, pp. 1911-1921, 2010.
 C.-H. Chang, “The relationship between the disposition effect and herding behavior: Evidence from Taiwan’s information technology stocks,” World Academy of Science, Engineering and Technology: International Journal of Social, Behavioral, Educational, Economics, Business and Industrial Engineering, vol. 7, pp. 1971-1975, 2013.
 W. G. Christie and R. D. Huang, “Following the pied piper: Do individual returns herd around the market?” Financial Analysts Journal, vol. 51, pp. 31-37, 1995.
 E. C. Chang, J. W. Cheng, and A. Khorana, “An examination of herd behavior in equity markets: Am international perspective,” Journal of Banking & Finance, vol. 24, pp. 1651-1679, 2000.