Momentum anomaly: evidence from India
Abstract
Purpose
This paper aims to examine the presence of momentum profit in the Indian stock market and seeks to explore the sources of momentum profit employing both risk based and behavioral models. R2, idiosyncratic volatility, and delay measures are employed in order to test behavioral models.
Design/methodology/approach
The paper follows Jegadeesh and Timan's methodology in constructing momentum portfolios.
Findings
The study finds strong presence of momentum profits in India during 1995‐2006. The risk based models such as CAPM and Fama‐French fail to account for the phenomenon. Idiosyncratic risk exhibits a positive relation with momentum, lending support to behavioural factors as source of momentum phenomenon.
Practical implications
In forming portfolios, selecting the stocks which have been winners in the last three and six months can help investors and fund mangers earn substantial profit.
Originality/value
The study employs behavioral variables to explain the momentum phenomenon. In the Indian context it is an unexplored area.
Keywords
Citation
Ansari, V.A. and Khan, S. (2012), "Momentum anomaly: evidence from India", Managerial Finance, Vol. 38 No. 2, pp. 206-223. https://doi.org/10.1108/03074351211193730
Publisher
:Emerald Group Publishing Limited
Copyright © 2012, Emerald Group Publishing Limited