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

• We examine the momentum profitability of the constituent stocks of S&P/ASX200 index.
• The study incorporates the short-selling ban during the global financial crisis.
• Industry momentum and some risk factors on the stock momentum profits are assessed.
• Price momentum is most pronounced for longer holding periods.
• Industry momentum and risk factors cannot fully explain the stock momentum profits.

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.