Style rotation on the JSE

Abstract

Global studies of style momentum show evidence of significant risk-adjusted profits over short estimation and holding periods. This study, conducted on the Johannesburg Stock Exchange (“JSE”) is partially consistent with developed market literature. First, we find that momentum-based style rotation is strongest over short estimation and holding periods. Second, we find a positive relationship between the number of styles applied and performance. Third, factor spanning tests indicate that price momentum and quality reduce time-series alphas, inconsistent with the more recent literature. Additionally, we find an inverse relationship between holding period and returns. The latter result favors a behavioural explanation.