| Summary: | 碩士 === 國立政治大學 === 金融研究所 === 101 === Earnings momentum effect is one of wildly-discussed pricing anomalies that cannot be explained by capital assets pricing model, we would like to exam whether it exists in Taiwan stock markets. Specifically, we would examine how the profitability of the earnings momentum trading strategies is affected by credit risk (measured by the credit ratings, TCRI). Furthermore, we will examine whether downgrades have any impact on the profitability of earnings momentum trading strategy by excluding returns around rating downgrades. Finally, following the model designed by Avramov et al. (2012), we use the regression analysis to examine the relationship between the stock return and our variables of SUE and downgrades.
Through empirical data from 2003 to 2012 with stocks listed and ever listed on Taiwan Stock Exchange and OTC Securities Market, we find earnings momentum effect does exist. Furthermore, we examine whether the profitability of earnings momentum trading strategies significantly differs among different credit risk groups. We find that out return on our portfolio is not certainly higher when the credit risk is higher. However, after excluding returns around rating downgrades, we could find the relationship between the return and credit risk is positive.
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