01 Jan Learning From Asiya Investments' "Momentum investing in Asia"

Relative Momentum effect on both price and earnings is evident in Asia stocks.

In this article, Absolute Momentum will be used interchangeably with trend following or time series momentum. Relative Momentum will be used interchangeably with cross-sectional momentum or relative strength.

The paper shows that Relative Momentum effect is evident in Asia, with both price and earnings momentum factors delivering positive alpha over the period of analysis.

Asian stocks exhibited the price momentum effect over the 3 to 12 month horizon, with the past 12-month price momentum factor performing the best. It was also observed that a short-term reversal effect (in contrast to momentum) was seen in Asia over the 1 month horizon; the past 1-month outperformers subsequently underperformed the broader market whereas the past 1-month laggards subsequently outperformed. We could enhance the effectiveness of momentum factors by excluding the impacts of the reversal effect.

“Exhibit 1” of the paper (reproduced below) shows the momentum effect of both price and earnings in Asia stocks.

Source: Asiya Investments

Both price momentum and earnings momentum factors performed well for most of the review period, with underperformance occurring during the turning points in the broad market index. This is shown in “Exhibit 6” of the paper, reproduced below.

Source: Asiya Investments

Research Paper: Momentum investing in Asia

Authors: Asiya Investments

Company: Asiya Investments