The Momentum Effect in Latin American Emerging Markets

We find that momentum strategies yield profits in Latin American emerging markets. Both stock type and country play a major role in explaining the momentum effect in these markets, but stock type is much more important. For risk-averse investors, winner portfolios stochastically dominate loser portfolios in these markets, implying that there are no asset-pricing models consistent with risk-averse investors that can rationalize the momentum effect. The results obtained via the bootstrap procedure without replacement also uphold this conclusion.