Abstract:
This study examines the negative return characteristic of momentum strategy, also known as momentum crashes, in Stock Exchange of Thailand from January 2001 to December 2018. This study aims to answer one main question. Do momentum crashes exist in Stock Exchange of Thailand? The result show that momentum crashes do exist in Stock Exchange of Thailand, where momentum portfolio perform poorly during panic state, defined by period that market rebound from its decline with high volatility. This poor performance is mainly driven by the option-like payoff characteristic of momentum portfolio, where the portfolio behave itself as a short call option, the portfolio gains a little when the market decline but loses a lot when the market increase. This option-like characteristic exist only in bear market and mainly driven by loser portfolio. In addition, the Fama-French factor is included into the model in order to see the time-varying characteristic of the factor toward momentum portfolio. The result show that the Fama French factor do not have a time-varying characteristic toward momentum portfolio.
