MOMENTUM AND LIQUIDITY ON THE JOHANNESBURGSTOCK EXCHANGE

• Main Authors: Daniel Page, James Britten, Christo J Auret
• Format: Article
• Language: English
• Published: Social Sciences Research Society 2013-01-01
• Series: International Journal of Economics and Finance Studies
• Online Access: http://www.sobiad.org/eJOURNALS/journal_IJEF/archieves/2013_1/Daniel-Page.pdf

Short-term price momentum has become aglobally popular topic of research, witha plethora of international evidence proving its profitability. This paperinvestigates short and medium term momentum strategies on the JohannesburgStock Exchange (JSE) over the periodJanuary 1995 to December 2010. The studyfurther considers the interaction betweenmomentum and liquidity, proxied byturnover. We find that there is a significant momentum effect on the JSE over thesample period, yet the magnitude of profitsdeclines in thelatter half of thesample. When combining liquidity with momentum, the high and intermediateliquidity momentum strategies achieve consistently significant average excessreturns, yet the low liquidity momentum results are largely inconsistent andinsignificant. The findings of this paper are in line with the behaviouraldecomposition of the momentum effect, asthere is evidence ofboth a short-termmomentum effect and the beginningsof a longer-term reversal.