Price randomness, contrarian and momentum strategies: a study of return predictability in the Malaysian stock exchange

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dc.contributor.authorTafdil, Husni
dc.date.accessioned2014-11-14T07:49:21Z
dc.date.available2014-11-14T07:49:21Z
dc.date.issued2005
dc.descriptionPh.Den_US
dc.description.abstractUsing daily data of firms listed on the Main Board of the Malaysian stock market for the period January 1988 through October 2002, this study looks at the predictability of returns in the Malaysian stock market. More specifically, the study attempts to investigate whether the Malaysian stock market is predictable using past or historical price information. There are three stages in this investigation. First, the study investigated the randomness of stock prices by using the variance ratio test. The study finds that the stock returns in the Malaysian stock market does not follow a random walk in the short and medium terms i.e. one-month, two-month and three-month intervals, respectively. In the second stage, the study examined the profitability of contrarian and momentum strategies by employing a strategy quite similar to Jegadeesh and Titman (1993). The study reveals that a contrarian strategy appears to work for the short-term, i.e., one-month ranking and one-month testing period strategy. Whereas, momentum strategies are profitable at the medium term i.e. for both two-month ranking and two-month testing periods, and three-month ranking and three-month testing periods. The last stage was to further investigate the characteristics of contrarian and momentum effect, namely what factors determine the magnitude of contrarian and momentum profits. These factors include firm characteristics such as firm size, book to market (B/M) ratio and trading volume turnover, and non firm-characteristics such as time varying risk, seasonality and business cycle. The study found that the short-term contrarian profits remain profitable even after controlling for non-firm characteristics i.e. time varying risk, seasonality and business cycle. With regards to firm characteristics, contrarian profits only exist in small size firms and are more pronounced for stocks with high B/M, and high trading volume turnover. Whereas, momentum profits are more pronounced for firms of smaller size, low B/M ratio, and high trading volume turnover, and during upturn economy. Momentum profits disappear after controlling for change in risk and seasonality.en_US
dc.identifier.urihttp://hdl.handle.net/123456789/488
dc.language.isoenen_US
dc.subjectBusiness Administrationen_US
dc.subjectStock Exchangeen_US
dc.titlePrice randomness, contrarian and momentum strategies: a study of return predictability in the Malaysian stock exchangeen_US
dc.typeThesisen_US
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