Momentum effect: Developed vs. emerging stock markets

Abstract

In the recent debates over the informational efficiency of the stock markets, particular attention has been paid to the momentum violating the traditional finance theory which is being taught at business schools. Although many empirical findings support the existence of price momentum, there are still many angles to be researched for the sake of complete understanding of the momentum phenomenon. This paper will emphasize the importance of country selection for the profitability of momentum strategies since academic literature lacks the comparison of the momentum profitability across Emerging and Developed stock markets. Therefore, the main objective of the paper is to investigate the profitability difference of momentum effect between Emerging and Developed stock markets. The study will embrace back-testing stock markets across pre-crisis (year 2005 to 2007) and crisis (year 2008 to mid-2010) periods. © 2011 Springer-Verlag.