Abstract

Huang (2021) proposes the momentum gap, which is the difference in the formation-period returns between past winners and losers, as a strong predictor of momentum returns. This study extends Huang's (2021) analyses to the Taiwan stock market by proposing that the composition of market participants and the imposition of price limits in this market have opposite impacts on the momentum gap. Our results indicate that the momentum gap fails to predict momentum returns in Taiwan, a phenomenon that is in line with our conjecture that the imposition of price limits mitigates the effectiveness of the momentum gap.

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