Does momentum effect exist under financial crisis? : a basic research in Canadian stock market

Abstract

Momentum effect is a market anomaly. It indicates that past winners in the stock market keep over-performing past losers over the short run namely, one to twelve months. The purpose of this paper is to examine whether the momentum could exist during the time of financial crisis. With a sample which includes stocks from the Toronto Stock Exchange (TSX) from March.03, 2007 to April, 04, 2008, we conclude that the momentum effect is not significant in Canada stock market in that period of time. Meanwhile, this paper offer reasonable explanation for the disappearance of momentum effect, including information symmetry, market state and confirmation bias.