Title
Survivorship bias and alternative explanations of momentum effect
Date of this Version
10-19-2011
Document Type
Conference Paper
Abstract
This paper provides the first detailed examination of momentum effect in Australian equity market. In contrast to previous research, we find that momentum effect has not been present in Australian market since late 1970s. We argue that previous research found strong momentum effect because they assumed perfect foresight of future delisting or acquisitions in the sampling process. In addition, we find that Fama and French three-factor model cannot explain the mean momentum returns although it can fully rationalize the returns on winners and losers portfolios. Our findings raise awareness in the literature that momentum effect is not robust to different sampling methods. We contribute an alternative explanation to momentum returns documented in existing literature. Momentum effect could be a product of look-ahead bias incurring from the sampling techniques. More importantly, we provide supports to the efficient market hypothesis at weak form.
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This document has been peer reviewed.
Publication Details
Citation only.
Henker, J., Henker, T., & Huynh, T. D. (2011). Survivorship bias and alternative explanations of momentum effect. Paper presented at the 2011 Financial Management Association (FMA) Annual Meeting, Denver, Colorado, United States.
Access the conference website.
2011 HERDC submission. FoR code: 150201
© Copyright Julia Henker, Thomas Henker & Thanh Duc Huynh, 2011