Chasing momentum: New evidence from Hong Kong investors on the Adaptive Markets Hypothesis
Abstract
Purpose
This study aims to find out why and how institutional investors in Hong Kong use momentum in the investment process.
Design/methodology/approach
This study is based on interviews with 25 institutional investors based in Hong Kong, all of whom had practical investment experience of at least three years and direct responsibility for making investment decisions.
Findings
Nearly all the managers interviewed use momentum strategies, and they gave three main reasons for this. First, they find momentum works in practice, particularly in the short term. Second, they believe recent changes in market conditions, such as higher volatility and widespread news coverage, have increased momentum effects. Third, they say institutional factors matter. Frequent monitoring of performance is now the norm, and this tends to focus on short-term results.
Originality/value
This study complements earlier quantitative research that shows momentum strategies is a method commonly used in investment decisions. It also adds to our knowledge of what institutional investors actually do in practice, and what factors influence their application of momentum strategies.
Keywords
Acknowledgements
The authors wish to express thanks to all the investors and investment companies who agreed to take part in this project. Their generous support made the research possible. This research received no specific grant from any funding agency in the public, commercial or not-for-profit sectors.
Citation
Pirie, S. and Chan, R.K.T. (2015), "Chasing momentum: New evidence from Hong Kong investors on the Adaptive Markets Hypothesis", Qualitative Research in Financial Markets, Vol. 7 No. 3, pp. 218-229. https://doi.org/10.1108/QRFM-01-2014-0003
Publisher
:Emerald Group Publishing Limited
Copyright © 2015, Emerald Group Publishing Limited