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http://dx.doi.org/10.13106/jafeb.2021.vol8.no7.0365

Momentum Strategies and Stock Returns: A Case of Saudi Stock Market  

KHAN, Muhammad Asif (College of Business (Rabigh), King Abdulaziz University, Faculty of Business and Law, Newcastle Business School, Northumbria University)
REHMAN, Ramiz Ur (Management Sciences, Lahore Business School, The University of Lahore)
AHMAD, Muhammad Ishfaq (Management Sciences, Lahore Business School, The University of Lahore)
HARTHI, Majed Al (College of Business (Rabigh), King Abdulaziz University)
Publication Information
The Journal of Asian Finance, Economics and Business / v.8, no.7, 2021 , pp. 365-373 More about this Journal
Abstract
This paper investigates the presence of momentum profits in the Saudi stock market. The study applied a quantitative method by utilizing monthly closing prices of 194 listed firms on Tadawal (Saudi Stock Market). The data from January 2010 to February 2019 is taken from the Tadawal market database for analysis. The sample is further divided into two equal sub-samples based on the structural changes that occurred in the Saudi stock market. Moreover, the high- and low-value traded portfolios are also constructed to examine the presence of momentum profits. Sixteen investment strategies are formed for each sample. The results show a very strong presence of momentum profits in the Saudi stock market for the full sample as well as for the sub-samples. The momentum profits are observed for a longer investment horizon. The results confirm that the short or medium-term formation of portfolios produces negative momentum returns for high-value traded stocks. The low-value traded stocks portfolios give similar results to the full sample results in terms of momentum profits. The results suggest that an investor should keep an eye on the past performance of desired stocks for at least three-nine months in which they are willing to invest.
Keywords
Momentum Profits; Value Traded Stocks; Emerging Market; Frontier Market;
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