Abstract
The study aims to reaffirms the existence of short-term momentum effect in 13 developed and emerging stock markets where previous literature has lack of consensus. Although many studies emphasis on the existence of momentum effect, but still, there are substantial number of researchers that deny the its presence. The contradictory finding of many researchers over the existence of momentum effect, raises a serious question, to what extend our stock markets are informationally efficient and whether investor can make abnormal profits by using momentum investment strategies. This study applies momentum investment strategy, J6K6, to calculate momentum returns. Our study finds negative significant momentum effect in all 13 stock markets. Although momentum effect is present in 13 countries but Investors are not able to attain abnormal profit through momentum investing. These findings have an utmost importance for practitioners that they should not adopt momentum investment strategies in these countries as these strategies are generating lose. Moreover, stock market regulators should formulate these markets on the notion of efficient market hypothesis.
Highlights
Short term momentum effect has been debated for long in the finance literature soon after the seminal work of Jegadeesh and Titman (1993) (here after J&T, (1993))
The study aims to test whether short-term momentum effect exists in the developed and emerging stock markets
Our study has a great significance towards efficient market hypothesis because previous literature suggests that existence of momentum effect is a negation of efficient market hypothesis
Summary
Short term momentum effect has been debated for long in the finance literature soon after the seminal work of Jegadeesh and Titman (1993) (here after J&T, (1993)). It is a stock market phenomenon which establishes that the stocks that have performed well in the recent past (winners) will continue to perform well in the future, and the stocks that have performed worse in the Momentum Effect in Developed and Emerging. Short-term momentum effect has been subject to many empirical studies ever since its inception Another of J&T (2001) study, the U.S market extended their time period as compared to their previous study. Griffin, Ji and Martin (2003) study momentum effect under different economic conditions and find momentum effect can be profitable from 3 to 5 years. Zhang (2006) studies momentum effect in stock market under information uncertainty and states momentum effect is higher if stock markets are subject to greater information uncertainty
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