Strong and Weak Momentum Components: Evidence From International Market Indices

Abstract

Simply splitting the traditional momentum portfolios into two components based on past long-term performance produces contrasting strategies. Early-stage momentum profits are larger than the traditional momentum strategy’s profits when applied to developed and emerging market indices. For emerging markets, recent winners that have poor long-term returns outperform recent losers with good long-term returns on an average annualized basis by 10.4 per cent per year. In contrast, recent winners outperform recent losers on an average annualized basis by only 6.1 per cent per year.

Keywords: early-stage, momentum effect, developed markets, emerging markets, indices

JEL Classification: G14, G15