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Gutierrez and Kelly (2008) recently documented momentum in weekly returns. Using the Australian market as a setting, we find that stocks with high 1-week returns exhibit a continuation in returns up to 1 year after a brief initial return reversal. However, after controlling for the intermediate-horizon past performance, the continuation in returns after 1-week returns disappears. These findings suggest that different past investment horizons contain separate information about price momentum and that intermediate-term trends dominate short-term trends in driving future returns. Overall, we show that understanding momentum over different horizons facilitates the design of more profitable trading strategies. [ABSTRACT FROM AUTHOR]

Utilising a comprehensive data set for Australian firms, we examine a range of competing asset-pricing models, including the four- and five-factor models where the equity-risk premium is augmented by size, value, momentum and liquidity premia, and find that none of the models tested appears to adequately explain the cross section of Australian returns. A model accounting for Australia's integration with the US equity market appears to be the best of the competing models we study. Our argument that a model recognising Australia's integration with the USA is supported when we apply the portfolio and factor construction methodology suggested by Brailsford et al. (2012a,b). [ABSTRACT FROM AUTHOR]

Small stocks tend to reverse, whereas large stocks tend to trend over a one-month horizon, which explains the lack of short-term reversals in the Australian market as a whole. However, large stocks exhibit intra-industry reversals, in which industry winners underperform industry losers in the subsequent month, when controlling for price momentum. Conversely, once this intra-industry reversal is neutralised, large stocks display momentum behaviour, in which market winners outperform market losers. These conditional strategies generate positive, significant risk-adjusted returns on large stocks in Australia. This paper documents significant industry momentum, as winning industries outperform losing industries in the following month. This industry momentum effect dominates the intra-industry reversal. The paper also finds evidence that conditional reversals are driven by illiquidity and are inhibited by stock prices under-reacting to earnings announcements. [ABSTRACT FROM AUTHOR]

Using evidence from pairs trading in Australia's equity market, we study the effect of the 2008 worldwide ban on short selling on the Law of One Price (LOP). We find that the ban surprisingly does not hinder the enforcement of the LOP. Violations did arise rather frequently in the turbulent market during the ban period; however, they were subsequently corrected, with prices of close economic substitutes promptly converging to parity. We show that the working of the LOP is not driven by professional arbitrageurs. We suggest that rational, long-only investors are likely to be the enforcer of the LOP, as these investors who are unbound by the ban, simply sell their holdings of stocks that are overpriced relative to their close economic substitutes. [ABSTRACT FROM AUTHOR]