Momentum and Capital Structure in the Australian Stock Market

IF 1.2 Q3 BUSINESS, FINANCE
Quy Duong Le
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Abstract

Although there is broad consensus on a robust momentum effect in Australia, the interaction between momentum and capital structure has been underexplored in the literature. This paper explicitly examines whether capital structure promotes momentum trading in the Australian stock market. The data sample includes over 1800 stocks listed on the Australian Stock Exchange from 2000 to 2023. We construct momentum portfolios using the monthly rolling and overlapping techniques. Two ratios are calculated to measure the firms’ capital structure: the book-value and market-value financial leverages. Irrespective of the capital structure measure, the superior returns of the Winner quintile are concentrated in highly leveraged stocks. In contrast, the high-leverage Loser performs worst among the Loser quintile. The return of momentum strategy enhanced with capital structure is more than 1.5 times the original momentum profit. The risk-adjusted analysis paints a similar return pattern. Additionally, we observe high volatility in earnings and cash flows for highly leveraged stocks, leading to significant mispricing. Thus, the interaction between momentum and capital structure may stem from increased misvaluation, consistent with a behavioral explanation.

Abstract Image

澳大利亚股票市场的动量和资本结构
尽管在澳大利亚对强劲的动量效应有广泛的共识,但动量和资本结构之间的相互作用在文献中尚未得到充分的探讨。本文明确考察了资本结构是否促进了澳大利亚股票市场的动量交易。数据样本包括2000年至2023年在澳大利亚证券交易所上市的1800多只股票。我们使用月滚动和重叠技术构建动量投资组合。计算两个比率来衡量公司的资本结构:账面价值和市场价值财务杠杆。无论资本结构如何衡量,赢家五分之一的高回报都集中在高杠杆股票上。相比之下,高杠杆的失败者在失败者中表现最差。资本结构增强的动量策略收益是原动量利润的1.5倍以上。风险调整后的分析也描绘了类似的回报模式。此外,我们观察到高杠杆股票的收益和现金流的高波动性,导致严重的错误定价。因此,动量和资本结构之间的相互作用可能源于估值错误的增加,这与行为解释相一致。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
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来源期刊
CiteScore
2.30
自引率
7.10%
发文量
69
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