Why is there no momentum in the Taiwan stock market?

Momentum strategies usually do not produce significant profits in emerging stock markets. Chui, Titman, and Wei [Chui, A. C. W., Titman, S., & Wei, K. C. J. (2000). Momentum, legal systems and ownership structure: An analysis of Asian stock markets. Working paper, Hong Kong Polytechnic University, Chui, A. C. W., Titman, S., & Wei, K. C. J. (2006). Individualism and momentum around the World. Working Paper, Hong Kong Polytechnic University] argue that the lack of profitability is due to cultural differences. In this paper, we look at one of the largest emerging markets, the Taiwan stock market. We find that DOWN markets occur more frequently and momentum profits are more negative following DOWN markets in Taiwan than in the US. Taken together, our findings suggest that the lack of profits from momentum strategies in emerging markets may be due more to the state-dependence of momentum discovered by Cooper, Gutierrez, and Hameed [Cooper, M. J., Gutierrez R. C., & Hameed, A. (2004). Market states and momentum. Journal of Finance, 59, 1345–1365] rather than to cultural differences.