The Profitability of the Momentum Strategies and Their Transaction Costs in the Hong Kong Stock Market
Chan, Ka Ho (2009) The Profitability of the Momentum Strategies and Their Transaction Costs in the Hong Kong Stock Market. [Dissertation (University of Nottingham only)] (Unpublished)
This paper examines the profitability of the momentum trading strategies in Hong Kong over the period 1993 to 2008. We demonstrate that the returns from buying winners outperforms that of short-selling the losers. In particular, short selling losers would suffer a persistent loss across our observed strategies. Besides, we find that the associated transaction costs for short selling the losers is more than double as high as the costs of buying the winners. After deducting the transaction costs, we observe that the profitability of the momentum strategies vanishes for shorter terms but remains for the longer horizons based on the actual turnover approach. All in all, our findings deliver a message that short selling losers is expensive to trade and undermines the total momentum profitability in the Hong Kong Stock Market.
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