A Study on the Relationship between Stock Return and Momentum by Volume and Price

According to behavioral finance, investors make investment decisions by recognizing past information as useful information. Investment decisions based on past information cause an overreaction to stock prices. According to previous studies on the Korean stock market, momentum based on trading volume and price information has a significant positive influence on stock returns. In this study, the Korean stock market is divided into the securities stock market and the KOSDAQ market to investigate which market the existing results are due to. Furthermore, an empirical analysis is conducted on the irrational behavior of investors based on transaction volume and price information. The research method uses univariate portfolio analysis and multivariate portfolio analysis and divides the decile portfolio and the conditional 5th quintile portfolio based on the momentum substitution considering the transaction volume. It is checked whether the momentum based on past transaction volume and price information lasts for the next six months. As a result, in the securities market, it is confirmed that the momentum according to transaction volume and price information has a significant positive effect on stock returns, and these results are maintained even after considering firm characteristics. On the other hand, it is stated that momentum according to transaction volume and price information does not occur in the KOSDAQ market. It shows that the existing results are due to the securities stock market rather than the KOSDAQ market.