Information asymmetry and momentum in Thailand

Abstract

The study examines the existences of price and earnings mimentum anomalies. The persistence of momentum anomalies over the past few decades raises serious doubts about the efficient market hypothesis. There is no consensus on the sources of these momentum anomalies and who causes them. This study examines the potential sources of momentums and investigates who causes momentums. This study uses the listed firms on the SET during 1999 to 2007. The unique data set allow us to investigate behaviors of different investorgroups, without using trade size as a proxy for investor type. This study finds that information asymmentry is the source of price momentum. Stocks with high turnover exhibit return momentum under information asymmetry and exhibit return reversal under information symmetry. Foreign investors and local institutional investors cause price momentum. Earnings momentum is caused only by foreign investors. Under Wang's (1994) model, the local individual investors are informed but the local institutional investors and foreign investor are uninformed. The investors with local knowledge are better informed than investors with more knowledge and sophisticated portfolio management skill.