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Momentum Decomposition: Evidence from Emerging Markets

Author

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  • Hongbo Guo
  • Xianhua Wei

Abstract

To explain the reason why momentum effect in emerging markets is much weaker than that in developed markets. We divide the traditional momentum returns into intra-style momentum and inter-style momentum effect on the basis of style investing. According to the result, intra-style momentum effect spreads widely in all of the twelve emerging markets, as the primary driving factor for the overall momentum effect. Besides, the inter-style momentum strategy has distinct property in all kinds of markets, leading to the poor performance of momentum strategy in some markets. It is also discovered in the cross-section regression that in emerging markets, the style-adjusted firm-specific return is in evidently positive correlation with the future stock return, but the relationship between the style return and future stock return is uncertain.

Suggested Citation

  • Hongbo Guo & Xianhua Wei, 2017. "Momentum Decomposition: Evidence from Emerging Markets," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 7(2), pages 123-132.
    • Handle: RePEc:asi:aeafrj:v:7:y:2017:i:2:p:123-132:id:1544
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