Revisiting the momentum effect in Taiwan: The role of persistency

The Taiwan stock market has been widely documented as a remarkable exception to the momentum phenomenon. We show evidence that a high turnover rate exists for winner and loser portfolios, which in turn attenuates momentum profits in this market. Nevertheless, a persistency-based momentum strategy that involves buying persistent winners and short-selling persistent losers generates significant profits in the intermediate term, and thus claims a momentum effect for this market. Further analysis indicates that momentum persistency is positively associated with investors' heterogeneous beliefs. Finally, the persistency-based momentum strategy is robustly profitable for international markets, especially those without the momentum effect.