
Analysis of Price Momentum Effects in the Korean Stock Market (Nov 28, 2012)
created At: 3/17/2025

Neutral
This analysis was written from a neutral perspective. We advise you to always make careful and well-informed investment decisions.
26
0
0
Fact
Momentum effect confirmed within KOSPI 200:
High past-return stocks continue rising, and low past-return stocks continue falling.
Aligns with Jegadeesh & Titman (1993) findings.
Momentum Universe Shrinkage Effect:
Momentum effects are stronger in certain subuniverses than in the full KOSPI 200.
Some stocks may act as noise, diluting overall momentum strategy performance.
Large-cap stocks weaken the momentum effect:
KOSPI 50 stocks reduce momentum strategy returns.
High information efficiency and institutional ownership in large caps make momentum strategies less effective.
Foreign investor influence:
Foreign investors’ preferences for certain stocks may distort momentum effects.
Excluding stocks heavily traded by foreign investors may improve strategy performance.
Opinion
This study highlights that while momentum effects exist in Korea, they are less effective in large-cap stocks due to higher information efficiency and institutional trading dominance.
The research also raises an important point: foreign investor trading patterns can interfere with momentum effects, suggesting that investors should tailor their strategies accordingly.
For optimal results, a mid- and small-cap-focused momentum strategy may be more effective, avoiding foreign investor-dominated stocks and refining stock selection within subuniverses.
Core Sell Point
Momentum strategies work in the Korean stock market, but large-cap stocks weaken their effectiveness. By adjusting for market size and foreign investor influence, investors can enhance momentum strategy performance.
26
0
0
Comments
0
Please leave a comment first