Momentum effect in Australian equities: Revisit, armed with short-selling ban and risk factors

It is well documented that past winning stocks continue to outperform past losing stocks in numerous equity markets. However, existing Australian evidence on the momentum effect is contradictory and limited, partly due to differences in empirical designs, sample periods and stock populations. We assess the momentum profitability over the most eligible stocks which are constituents of the S&P/ASX200 index. These stocks represent the principal equity investment universe for institutional investors and managed funds due to their sufficient size and liquidity which make the momentum trading strategies practical and implementable. By incorporating the short-selling ban during the global financial crisis, we find evidence of return persistence. The momentum effect is most pronounced amongst winning stocks for longer holding periods. Upon further exploration we find that neither an industry-driven momentum effect nor common risk factors can fully account for the momentum effect.