STUDYING THE RELATIONSHIP BETWEEN DEFAULT RISK AND MOMENTUM EFFECT: BASED ON EVIDENCE FROM FIRMS LISTED
ON TEHRAN STOCK EXCHANGE

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FALLAH SHAMS MIRFEIZ; AHMADVAND MAYSAM; KHAJEZADEH DEZFULI HADI

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Paper Information

Journal: FINANCIAL KNOWLEDGE OF SECURITY ANALYSIS (FINANCIAL STUDIES) Year:2018 | Volume:11 | Issue:37 Page(s): 103-118

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Information Journal Paper

Title

STUDYING THE RELATIONSHIP BETWEEN DEFAULT RISK AND MOMENTUM EFFECT: BASED ON EVIDENCE FROM FIRMS LISTED ON TEHRAN STOCK EXCHANGE

Author(s)

FALLAH SHAMS MIRFEIZ | AHMADVAND MAYSAM | KHAJEZADEH DEZFULI HADI | Issue Writer Certificate

Keywords

MOMENTUM EFFECTQ2

DEFAULT RISKQ1

BLACK-SCHOLES-MERTON (BSM) OPTION PRICING MODELQ2

BEHAVIORAL FINANCEQ2

TEHRAN STOCK EXCHANGEQ2

Abstract

This paper analyzes the role of DEFAULT RISK in the MOMENTUM EFFECT focusing on data from TEHRAN STOCK EXCHANGE during 19/04/2009-21/07/2015. DEFAULT RISK was calculated by a measure based on the Black-Scholes-Merton (BSM) option pricing model, where a firm’s DEFAULT RISK is derived from the market prices of its shares. This method overcomes some of the problems associated with the DEFAULT RISK measures used in prior studies. To describe MOMENTUM EFFECT, by determining the formation period to be 6 months, and the holding period to be 3, 6, or 12 months, we firstly examined the profitability of short term (3.6), midterm (6.6), and long term (12.6) momentum strategies and found that during abovementioned time period, only midterm momentum strategy is profitable. Then, we showed there is no relationship between DEFAULT RISK and MOMENTUM EFFECT. While the loser portfolio is characterized by high DEFAULT RISK, small size, high book-to-market ratio and illiquidity, characterization of the winner portfolio is somewhat more complex. This makes momentum profits difficult to forecast.

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APA: Copy

FALLAH SHAMS, MIRFEIZ, AHMADVAND, MAYSAM, & KHAJEZADEH DEZFULI, HADI. (2018). STUDYING THE RELATIONSHIP BETWEEN DEFAULT RISK AND MOMENTUM EFFECT: BASED ON EVIDENCE FROM FIRMS LISTED ON TEHRAN STOCK EXCHANGE. FINANCIAL KNOWLEDGE OF SECURITY ANALYSIS (FINANCIAL STUDIES), 11(37 ), 103-118. SID. https://sid.ir/paper/200226/en

Vancouver: Copy

FALLAH SHAMS MIRFEIZ, AHMADVAND MAYSAM, KHAJEZADEH DEZFULI HADI. STUDYING THE RELATIONSHIP BETWEEN DEFAULT RISK AND MOMENTUM EFFECT: BASED ON EVIDENCE FROM FIRMS LISTED ON TEHRAN STOCK EXCHANGE. FINANCIAL KNOWLEDGE OF SECURITY ANALYSIS (FINANCIAL STUDIES)[Internet]. 2018;11(37 ):103-118. Available from: https://sid.ir/paper/200226/en

IEEE: Copy

MIRFEIZ FALLAH SHAMS, MAYSAM AHMADVAND, and HADI KHAJEZADEH DEZFULI, “STUDYING THE RELATIONSHIP BETWEEN DEFAULT RISK AND MOMENTUM EFFECT: BASED ON EVIDENCE FROM FIRMS LISTED ON TEHRAN STOCK EXCHANGE,” FINANCIAL KNOWLEDGE OF SECURITY ANALYSIS (FINANCIAL STUDIES), vol. 11, no. 37 , pp. 103–118, 2018, [Online]. Available: https://sid.ir/paper/200226/en

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