Momentum or contrarian? Some suggestions to the investors. ( 初稿 ) 亞洲大學財務金融學系 助理教授 王癸元

學歷 學歷 ▫ 國立台灣科技大學企業管理所博士 ( 主修財務金融 ) ▫ 國立中正大學企業管理所碩士 ( 主修財務金融 ) ▫ 輔仁大學企業管理學系 經歷 經歷 ▫ 亞洲大學財務金融學系 講師 ▫ 臺中健康暨管理學院財務金融學系 講師 ▫ 致理技術學院企業管理學系兼任講師 ▫ 秋雨物流股份有限公司副主任 ▫ 秋雨物流股份有限公司專員 專長 專長 ▫ 行為財務學 投資管理 ▫ 公司治理 一般管理

期刊論文 期刊論文 ▫Wang, Kuei-yuan, Cheng-Yi Chien and Yen-Sheng Huang (Jan. 2010), “Relative strength and momentum profits,” Journal of Statistics & Management Systems, vol. 13 (1), pp (EI) ▫Wang, Kuei-yuan, Su-Chun Peng, Yen-Sheng Huang (Oct. 2009), “The intraday performance of contrarian strategies: Evidence from the Taiwan Stock Exchange,” Review of Pacific Basin Financial Markets and Policies, vol. 12 (4), pp (FLI) ( 國科會 B 級期刊 ) ▫Wang, Kuei-yuan, Ching-Hai Jiang and Yen-Sheng Huang (Jan 2009), “Market states and the profitability of momentum strategies: Evidence from the Taiwan Stock Exchange,” The International Journal of Business and Finance Research, vol. 3 (1), pp (ECONLIT) ▫Liu, Yu-lun, Kuei-yuan Wang, Su-Chun Peng and Yen-Sheng Huang (Sep. 2008), “The performance of the contrarian strategy and the momentum strategy in the Asia pacific region”, International Journal of Finance, vol. 20 (3), pp (FLI) ( 國 科會 B+ 級期刊 ) ▫Jiang, Ching-hai, Kuei-yuan Wang and Yen-sheng Huang (May 2008), “Managerial ownership, capital expenditures and firm performance: Evidence from the Taiwan Stock Exchange,” Corporate ownership & control, vol. 5 (4), pp (Leading paper) ▫Su-Chun Peng, Kuei-yuan Wang and Yen-Sheng Huang (Oct. 2007), “International Cross-listings, Valuation Effects, and Company Characteristics: Evidence from Taiwan”, Journal of Emerging Markets, vol. 12 (3), pp (ECONLIT) (Leading paper)

Working paperWorking paper ▫ 企業資訊透明度、投資者的異質性信念對動能績效影響之研究 ( 國科 會計畫，執行期間： ~ ) ▫Do short-term momentum profits hold under the market diffusion of herd behavior? ▫ The influence of pessimistic media coverage following bear market and the dynamic media coverage amount on momentum profits HonorsHonors ▫ 亞洲大學九十八學年度服務學習課程優良教師 ( 校級 ) ▫ 亞洲大學九十五學年度優良教學獎 ( 校級 ) ▫ 亞洲大學九十五學年度院級優良導師獎 ▫ 亞洲大學九十三學年度優良導師獎 ( 校級 ) ▫ 黃德舜、王癸元（ 2002 ），「技術創新、智慧資本與企業股東附加 價值關係研究」，第一屆中華民國企業評價研討會，中華民國企業 評價協會 主辦，頁 。（大會優良論文獎）

Over- confident Delayed reaction Price continue Momentum strategy Under- confident Over-reactionPrice reverse Momentum strategy

Contrarian strategy Over-reaction Hypothesis ▫De Bondt and Thaler (1985) ▫investors tend to overreact to new information. Such overreaction will be corrected in subsequent periods ▫They rank firms on the basis of prior 3-year returns and find that prior winners tend to underperform the market, while prior losers tend to outperform the market Buy the prior losers and sell the prior winners will generate excess return

Momentum strategy Jegadeesh and Titman (1993, 1995, 1997, 2001) Buy the prior winners and sell the prior losers will generate excess return

The reconciliation of the momentum and contrarian strategies Daniel, Hisrhleifer and Subrahmanyam (1998) Conrad and Kaul (1998) Hong and Stein (1999) Bhojraj and Swaminathan (2006)

Introduce my series studies about momentum strategies international market vs. momentum length of time horizons vs. momentum Relative strength vs. momentum Market state vs. momentum Herd behavior vs. momentum

International market vs. Momentum strategy Liu, Yu-lun, Kuei-yuan Wang, Su-Chun Peng and Yen-Sheng Huang (Sep. 2008), “The performance of the contrarian strategy and the momentum strategy in the Asia pacific region”, International Journal of Finance, vol. 20 (3), pp (FLI) ( 國科會 B+ 級期刊 )

Bhojraj and Swaminathan (2006) ▫They examine the return predictability in international equity indices. ▫They argue that stock prices initially underreact to information. Then stock prices rise toward their fundamental value and result in a pattern of price momentum. ▫As stock prices continue to rise above their fundamental value, subsequent price reversals will occur.

Table 1. Average cumulative abnormal returns (CARs, in %) for the 49 trading strategies in the Asia Pacific Region Formation period J Holding period q (month) (month) (0.7137)(0.4331)(0.6194)(0.7855)(0.6123)(0.5762)(0.6302) (0.4126)(0.7791)(0.0447)(0.8008)(0.3738)(0.7268)(0.5311) (0.5103)(0.0786)(0.8527)(1.1641)(0.6445)(0.3073)(0.1460) (0.5420)(0.7090)(1.0460)(1.1522)(0.6516)(0.6952)(0.3172) (0.3467)(0.4253)(0.4748)(0.3518)(0.0158)(1.2642)(0.9883) (0.9566)(1.7906)*(1.6582) *(1.6330)(1.6761)*(1.4750)(1.4986) (0.6515)(0.2913)(0.1437)(0.1686)(0.2161)(0.4790)(0.9816)

Table 2. Average cumulative abnormal returns (CARs, in %) for the 49 trading strategies of developed markets in the Asia Pacific Region Formation period J Holding period q (month) (month) ( )(0.7266)(1.0286)(0.0987)(0.1201)(1.2610)(1.7390)* (0.7340)(1.5171)(0.4667)(0.0770)(0.2844)(1.3261)(1.9176)* (1.0210)(0.4621)(0.2287)(0.2333)(0.2257)(2.0339)**(2.3265)** (0.1771)(0.1544)(0.1355)(0.2750)(0.8167)(1.9580)*(2.5285)** (0.3714)(0.3067)(0.1664)(0.7994)(1.4894)(1.9883)**(2.7923)*** (0.6621)(0.6717)(1.0804)(1.1417)(1.3333)(2.4503)**(3.2328)*** (0.3343)(0.3437)(0.7093)(1.0741)(1.2473)(2.5623)**(3.1773)***

Table 3. Average cumulative abnormal returns (CARs, in %) for the 49 trading strategies of developing markets in the Asia Pacific Region Formation period J Holding period q (month) (month) (0.8348)(0.2738)(0.5363)(0.8527)(0.6310)(0.7867)(0.9414) (0.3047)(0.5981)(0.1630)(0.8513)(0.4006)(0.8835)(0.9029) (0.4396)(0.2055)(0.9219)(0.9471)(0.6879)(0.5705)(0.3991) (0.6054)(0.7704)(1.0926)(1.2252)(0.6433)(0.9306)(0.8009) (0.3553)(0.4680)(0.5082)(0.2635)(0.1705)(1.4168)(1.2872) (1.0255)(1.7994)*(1.6251)(1.5988)(1.6731)*(1.5440)(1.6436) (0.7436)(0.3834)(0.0252)(0.0110)(0.3102)(0.6032)(0.6106)

Table 4. The seasonal effect of the contrarian strategy for the whole and the developing markets (unit: %) Strategy Performan ce Jan.Feb.Mar.Apr.MayJuneJulyAug.Sep.Oct.Nov.Dec. Whole Market (24,3) (1.7906)*(-0.31)(0.72)(1.91)*(0.79)(0.57)(1.39)(1.06)(0.85)(1.04)(2.23)**(2.28)** (3.12) *** (24,6) (1.6582)*(0.69)(0.65)(0.02)(0.91)(1.24)(1.23)(1.40)(1.68)(1.60)(1.33)(0.97)(0.21) (24,12) (1.6761)*(1.14)(1.04)(1.20)(1.12)(1.29)(1.19)(1.15)(1.23)(1.01)(0.23)(0.60)(1.54) Developing Market (24,3) (1.7994)*(0.16)(0.64 )(1.93)*(0.82)(0.53)(1.37)(0.99)(1.20)(1.04)(2.10)*(2.59)**(2.41)** (24,12) (1.6731)*(1.09)(1.04)(1.18)(1.12)(1.25)(1.14)(1.08)(1.21)(0.97)(0.54)(1.00)(1.37)

Table 5. The seasonal effect of momentum strategy for the developed markets (unit: %) Strategy Performan ce Jan.Feb.Mar.Apr.MayJuneJulyAug.Sep.Oct.Nov.Dec. Developed Market (1,36) (1.739)*(0.11) (2.28)* * (0.89)(0.35)(0.22)(0.54)(1.35)(0.62)(0.79)(0.39)(0.88)(0.21) (3,36) (1.918)*(0.61) (0.81)(1.12)(0.60)(0.12)(0.55)(0.86)(1.38)(1.69)(1.88)*(0.89) (6,24) (2.0339)**(0.80)(1.67)(1.28)(1.08)(1.00)(0.05)(1.10)(0.52)(0.70)(1.67)(1.31)(0.87) (6,36) (2.3265)**(1.20) (2.35)* * (1.96)*(1.11)(0.76)(0.09)(0.82)(0.75)(1.22)(1.65)(1.41)(1.40) (9,24) (1.9580)*(0.77)(1.31)(1.33)(1.40)(0.96)(0.32)(-0.24)(0.50)(0.77)(1.61)(1.16)(0.75) (9,36) (2.5285)**(1.15)(1.56)(1.82)*(1.58)(1.37)(0.79)(0.68)(0.71)(0.78)(1.54)(1.34)(1.36) (12,24) (1.9883)**(0.83)(1.22)(1.40)(1.56)(1.18)(0.71)(0.38)(0.66)(0.79)(1.34)(1.16)(0.59) (12,36) (2.7923)** * (1.27)(1.45)(1.63)(1.66)(1.25)(0.86)(1.09)(1.21)(1.38)(1.41)(1.52)(1.23) (24,24) (2.4503)**(1.05)(1.27)(1.53)(1.69)(1.38)(0.99)(0.80)(0.93)(1.15)(1.66)(2.02)*(0.12) (24,36) (3.2328)** * (1.41)(1.64)(1.69)(1.82)*(1.46)(1.14)(1.09)(1.27)(1.52)(1.55)(1.72)(1.77) (36,24) (2.5623)**(1.65)(2.02)*(1.85)*(2.07)*(1.37)(0.79)(0.68)(0.78)(1.21)(1.65) (2.29)* * (0.31) (36,36) (3.1773)** * (1.57)(1.63)(1.66)(1.81)(1.45)(1.16)(1.27) (1.49)(1.73) (2.51)* * (2.66)**

Table 6. The components of the returns of the contrarian and momentum strategies in the Asia Pacific Region (unit: %) Trading strategyReturn Times series predictability Cross-sectional variance Whole markets (24,3) %47.40% (1.7906)* (24,6) %49.54% (1.6582)* (24,12) %60.09% (1.6761)* Developing markets (24,3) %53.21% (1.7994)* (24,12) %64.00% (1.6731)*

continued Developed markets (6,24) %89.79% (2.0339)** (9,24) %106.18% (1.9580)* (12,24) %116.51% (1.9883)** (24,24) %159.08% (2.4503)** (36,24) %228.90% (2.5623)** (1,36) %91.70% (1.7390)* (3,36) %92.36% (1.9176)* (6,36) %80.87% (2.3265)** (9,36) %82.82% (2.5285)** (12,36) %90.73% (2.7923)*** (24,36) %138.49% (3.2328)*** (36,36) %148.17% (3.1773)***

The length of time horizons vs. Momentum strategy Wang, Kuei-yuan, Su-Chun Peng, Yen-Sheng Huang (Oct. 2009), “The intraday performance of contrarian strategies: Evidence from the Taiwan Stock Exchange,” Review of Pacific Basin Financial Markets and Policies, vol. 12 (4), pp (FLI) ( 國科會 B 級期刊 )

Figure 1. Intraday return volatility.

Holding period K (in minutes) Portfolio formation period J (in minutes) （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） Table 1. Average abnormal returns (AARs, in %) for the 36 contrarian strategies in the whole period of the trading day

Holding period K (in minutes) Portfolio formation period J (in minutes) （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） - Table 2. Average abnormal returns (AARs, in %) for the contrarian strategies in the opening period 9:00 a.m.-9:30 a.m. of the trading day

Holding period K (in minutes) Portfolio formation period J (in minutes) （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） （ ＊ ） Table 3. Average abnormal returns (AARs, in %) for the 36 contrarian strategies in the middle period 9:30 a.m.-1:15 p.m. of the trading day

Holding period K (in minutes) Portfolio formation period J (in minutes) （ ＊ ） （ ＊ ） Table 4. Average abnormal returns (AARs, in %) for the contrarian strategies in the closing period 1:15 p.m.-1:30 p.m. of the trading day

Figure 2. Average abnormal returns (AARs) in the whole period of the trading day.

Figure 3. Average abnormal returns (AARs) in the openng period 9:00 a.m-9:30 a.m. of the trading day.

Figure 4. Average abnormal returns (AARs) in the middle period 9:30 a.m.-1:15 p.m. of the trading day.

Figure 5. Average abnormal returns (AARs) in the closing period1:15p.m.-1:30 p.m. of the trading day.

K (in minu tes) Portfolio formation period J (in minutes) LWPLWPLWPLWPLWPLWP Table 5. Decomposition of AARs (in %) for the 36 contrarian strategies in the whole period of the trading day

Relative strength vs. momentum Wang, Kuei-yuan, Cheng-Yi Chien and Yen-Sheng Huang (Jan. 2010), “Relative strength and momentum profits,” Journal of Statistics & Management Systems, vol. 13 (1), pp (EI)

The definition of relative strength is followed by Levy (1967). The relative strength indicator (RSI t ) is calculated as the ratio of the price at the end of the formation period (P t ) to the average price in the formation period (AP t ) as follow:

Table 1. Average abnormal returns (AARs) for the 25 momentum strategies Formation period （ J ） Holding period （ K ） WinnerLoserW-Lt W-L *1.80* *3.00* *-1.85* *-1.89* *2.51* *-3.38* *-1.88* *-1.65* *-2.58* *-2.74* *-3.27* *-1.71*

Table 2. The momentum profits for the upward and downward portfolios Formation Period (J) Holding Period (K) Upward portfolioDownward portfolio WinnerLoserW-Lt W-L WinnerLoserW-Lt W-L *-3.11* *-2.09* *-1.76* *-2.18* *-1.66* *-2.84* *-3.68* *-1.75* *-2.02* *-1.67* *-2.07* * 2.57*

Table 3. Momentum profits for the upward/downward portfolio and the original portfolio Formation Period (J) Holding Period (K) AAR up – original AAR down – original AAR down － AAR up t t t *-1.83* *-2.63* *1.94* *-3.15* *2.41* *1.94* *-2.13* *-2.09* *-2.24* *3.13* *3.38*

Market state vs. momentum Wang, Kuei-yuan, Ching-Hai Jiang and Yen-Sheng Huang (Jan 2009), “Market states and the profitability of momentum strategies: Evidence from the Taiwan Stock Exchange,” The International Journal of Business and Finance Research, vol. 3 (1), pp

Cooper, Gutierrez and Hameed (2004) ▫They test the overconfidence theory by examining the impact of the state of the market on momentum profits. ▫They hypothesize that traders’ overconfidence should be greater following the up markets. If investors holding equity position attribute market gains to their timing skill, their overconfidence will be stronger following the up markets which will result in greater momentum profits in the short run.

Table 1: Average abnormal returns for strategies (J, K) following up-market formation periods Formation Period (J) Holding Period (K) Following up-market formation periods Winnert W Losert L W-L t W-L * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

continued Formation Period (J) Holding Period (K) Following up-market formation periods Winnert W Losert L W-L t W-L * * * * * * * * * * * * * * * * * * * * * * * Mean

Table 2: Average abnormal returns for strategies (J, K) following down-market formation periods Formation Period (J) Holding Period (K) Following down-market formation periods Winnert W Losert L W-Lt W-L * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

continu continued Formation Period (J) Holding Period (K) Following down-market formation periods Winnert W Losert L W-Lt W-L * * * * * * * * * * * * * * * * * * * * * *

Table 3: Average abnormal returns for strategies (J, K) following up-market formation periods Formation Period (J) Holding Period (K) Holding periods in up markets Holding periods in down markets WinnerLoser W-Lt W-L Winner Loser W-L t W-L * * * * * * * * * * * * * * * * * * * * * * * * * *

continued Formatio n Period (J) Holding Period (K) Holding periods in up markets Holding periods in down markets Winne r Loser W-Lt W-L Winne r Loser W-L t W-L * * * * * * * * * * * * * * * *

Table 4: Average abnormal returns for strategies (J, K) following down-market formation periods Formation Period (J) Holding Period (K) Holding periods in up markets Holding periods in down markets Winner Loser W-L t W-L Winner Loser W-L t W-L * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

continued Formatio n Period (J) Holding Period (K) Holding periods in up markets Holding periods in down markets Winne r Loser W-L t W-L Winne r Loser W-L t W-L * * * * * * * * * * * * * * * * *

Herd behavior vs. Momentum Do short-term momentum profits still hold under the market diffusion of herd behavior? ▫ The attitude of investors toward information  over-weight to private information vs. neglect public information

Formation Period (J) Holding Period (K) All Samples Group Decreased Herd Behavior Group Increased Herd Behavior Group 11 －＋－ 3 ＋＋＋ 6 ＋＋＋ 12 ＋＋＋ 31 ＋＋－ 3 ＋＋＋ 6 ＋＋＋ ＋＋＋ 61 ＋＋＋ 3 ＋＋＋ 6 ＋＋＋ ＋＋－ 1 ＋＋－ 3 ＋＋－ 6 －－－ －－－ +13( 81.25%)14( 87.50%) 9( 56.25%) － 3( 18.75%) 2( %) 7( 43.75%) Total16( 100%)

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