| Summary: | 博士 === 國立中山大學 === 財務管理學系研究所 === 104 === Extensive finance literature discusses the interactive relationship between momentum strategies and investor attention and sentiment. This paper goes further by considering both cross-section characteristics, i.e. the impact of investors’ attention on the profitability of the momentum strategy, as well as the time series data, i.e. the influence of optimism/pessimism on the profitability of the momentum strategy. This paper adopts advertisements as a proxy variable for investors’ attention and then examines the effects of investor attention to the return momentum and residual momentum strategies according to different sentiments, and obtains the following findings:
1. The higher the advertising exposure, the greater the attention and the stronger the impression of investors. Within a short period of one year, the greater the investor cognizance, the more likely investors will buy stocks. As a result, the return momentum strategy on stocks with high advertising exposure achieves 1.914%, 6.550%, 13.355%, and 20.029% risk-adjusted returns on the 1-month, 3-month, 6-month, and 12-month holding periods, respectively; while the residual momentum strategy on stocks with high advertising exposure achieves 0.4%, 0.6%, 1.0%, and 1.2% risk-adjusted returns on the 1-month, 3-month, 6-month, and 12-month holding periods, respectively.
2. Further study on the return momentum strategy on stocks with high advertising exposure and on stocks with low advertising exposure finds that, the spread in risk-adjusted returns between on these two sets of stocks on 1-month, 3-month, 6-month, and 12-month holding periods are 1.476%, 5.219%, 7.725%, and 8.940%, respectively, which are all statistically significant. This implies that the return momentum strategy on stocks with high advertising exposure generates greater returns than that on stocks with low advertising exposure.
3. In optimistic sentiment, the advertising exposure fascinates the investors more attention to good news and slows down the transmission of bad news; and when combined with the limitation of shorting, causes a continued decline in the return of losers portfolio, while resulting in a prolonged period of profitability for the momentum strategy. In other words, the impact of different market sentiments on the profitability of the return momentum strategy is asymmetric. The return momentum strategy on the stocks with high advertising exposure is more profitable when the market is optimistic than when the market is pessimistic. The risk-adjusted returns of the return momentum strategy on stocks with high advertising exposure amid optimism are 3.207%, and 6.828% higher than those amid pessimism on the 3-month, and 6-month holding periods, respectively.
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