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Decomposing the Momentum in the Japanese Stock Market

Author

Listed:
  • Yasuhiro Iwanaga

    (Hakuoh University)

  • Takehide Hirose

    (Sumitomo Mitsui DS Asset Management Company, Limited)

  • Tomohiro Yoshida

    (Nissay Asset Management Corporation)

Abstract

In this study, we decompose momentum indicators for the Japanese stock market into two components, high-to-price and price-to-high. High-to-price has a lower downside risk and higher Sharpe ratio than price-to-high. We find that a conventional momentum strategy combines the characteristics of high-to-price in a bull market and those of price-to-high in a bear market. In particular, the large drawdowns of momentum strategies reported in previous studies seem to be largely owed to those of price-to-high in bear markets. It is possible that the mechanism generating factor returns differs among the three strategies.

Suggested Citation

  • Yasuhiro Iwanaga & Takehide Hirose & Tomohiro Yoshida, 2024. "Decomposing the Momentum in the Japanese Stock Market," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 31(2), pages 221-250, June.
    • Handle: RePEc:kap:apfinm:v:31:y:2024:i:2:d:10.1007_s10690-023-09413-y
    DOI: 10.1007/s10690-023-09413-y
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    References listed on IDEAS

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    More about this item

    Keywords

    Momentum; Decomposition; Behavioral finance; Japan;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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