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| This is the first study to investigate the relationship between earnings momentum and sales momentum in the Taiwan stock market. The results show that there are significant earnings momentum and sales momentum effects. Although there is a relationship between the two effects, one effect is not subsumed by the other. Momentum effects persist even after controlling firm size, book-to-price, industry, past return, turnover, market state, and risk. This study extends Barberis et al. (1998) model, constructs a behavioral model to explain this relationship, and finds empirical results with behavioral model's predictions nearly consistent. The evidence supports that an investors' underreaction drives momentum effects and a conservatism bias leads investors to underreact to news. |
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| Earnings Momentum, Sales Momentum, Underreaction, Conservatism Bias |
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