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| Type | Master's Thesis |
| Scope | Discipline-based scholarship |
| Title | Is Value and Momentum Relevant for Asian Markets? |
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| Institution | University of Zurich |
| Faculty | Faculty of Business, Economics and Informatics |
| Date | 2022 |
| Abstract Text | This master thesis aims to re-examine the topic of asset pricing anomalies and factor investing in Japan, South Korea and China over the past two decades. The analysis is fourfold: first, the existence of size, value and momentum effects is investigated; second, the performance of the aforementioned factor strategies is analyzed from an investor’s perspective; third, factor exposures and risk premia are estimated using the Fama-MacBeth approach and finally, in order to shed more light and attempt to explain the widely acknowledged failure of momentum in certain countries, on the one hand, a combination of value and momentum strategies is constructed and, on the other hand, the role of the underlying market dynamics is included in the analysis of momentum. I find that over the period studied, size strategies generate excess returns in all three countries. Value effects are present in Japan and South Korea but not in China, while momentum strategies generated high returns in South Korea but do not seem to be profitable in Japan and China. The combined strategy outperforms its pure-play counterparts in all three countries while effectively reducing volatility. In examining the explanatory power of excess returns, none of the factors appear to be priced, hence no significant risk premia could be found. Looking for reasons for the unprofitable momentum strategy in Japan and China, I find that the average momentum returns are highest when the market continues to fall, showing that there are conditional positive momentum returns. Similarly, option-like behavior is observed in both countries when a bearish market rebounds. |
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