本研究使用台灣股市的資料嘗試去找出信用評等是否會影響動能現象, 根據
Avramov’s (2007)的發現, 在美國股市中動能與信用評等間存在高度的相關性, 在本
研究中,台灣股市也存在著相似的現象, 在低信用評等的公司中, 使用動能的獲利性高
於高信用評等的公司;而營運績效銷售成長率流動性與償債能力這些會影響信用評等的
因素也是影響動能的主要因素,這些因素加強了在不同的信用評等公司間的動能效果。

This paper attempts to find the relationship between momentum and firm’s credit rating.
According to Avramov’s (2007) finding, there is a strong link between momentum and firm
credit rating in US. In this paper, the similar phenomenon is proven existing in Taiwan stock
market. Momentum profitability is large among low-grade firms, but it is insignificant among
high-grade firms. The source of momentum profits is from operating performance, financial
performance, volatility and illiquidity. For loser (winner) stocks in the low rating category,
profit margins, sales growth, operating cash flows, and interest coverage decrease (increase)
over the formation and holding periods, while illiquidity and volatility increase (decrease). As
the market observes the deteriorating (improving) conditions, there is a pressure to sell (buy)
losers (winners), which enhances gains among high risk winners and losses among high risk
losers.

Content
Table Index ................................................................................................................... 2
Figure Index ................................................................................................................. 2
Chapter 1 Introduction................................................................................................ 1
1.1 Motives and purposes .......................................................................................... 1
1.2 Framework of the thesis ....................................................................................... 2
Chapter 2 Literature Review ...................................................................................... 4
2.1 Business cycle ...................................................................................................... 4
2.3 Investor psychology and security market under-and overreactions ..................... 5
2.5 Trading volume and illiquidity ............................................................................ 6
2.6 Credit rating ......................................................................................................... 6
Chapter 3 Methodology and Data .............................................................................. 8
3.1 Hypothesis of Research........................................................................................ 8
3.2 Methodology and Variable Definition ................................................................. 8
3.2.1 The construction of momentum portfolio ...................................................... 9
3.2.2 The analysis of performance of momentum portfolio during expansion and
recession. ............................................................................................................. 10
3.2.3 Illiquidity ..................................................................................................... 12
3.2.4 Cross sectional analysis. ............................................................................. 13
3.3 Data and Sample Selection ................................................................................ 14
Chapter 4 Empirical Tests and Results ................................................................... 18
4.1 Momentum portfolio over the formation period and credit rating ..................... 18
4.2 Momentum profitability and credit rating.......................................................... 19
4.3 Unconditional Momentum over Different Rating Sub-samples ........................ 22
4.4 Understanding the source of momentum profits ................................................ 24
4.4.1 Operating performance of the winner and loser stocks .............................. 25
4.5 Market characteristics of winners and losers ..................................................... 32
4.6 Cross-sectional analysis ..................................................................................... 35
Chapter 5 Conclusions and Suggestions .................................................................. 42
5.1 Conclusions ........................................................................................................ 42
5.2 Suggestions ........................................................................................................ 43
References ................................................................................................................ 44

Table Index
Table 1 TCRI Rating ...................................................................................................... 2
Table 2 The correlation coefficients between TAIEX and three indicators ................ 11
Table 3 The TCRT’s grade ratings .............................................................................. 16
Table 4 Ten Financial ratios. ....................................................................................... 17
Table 5 Credit Rating Profile of Momentum Portfolios over Formation Period ......... 18
Table 6 Momentum by Credit Risk Group .................................................................. 21
Table 7 Unconditional Momentum over Different Rating Sub-samples ..................... 23
Table 8 Characteristics over Months of Holding Period ............................................. 26
Table 9 Market Characteristics of Winners and Losers ............................................... 33
Table 10 Cross-Sectional Analysis Controlling for Some Stock Characteristics ........ 36
Table 11 Descriptive statistics of average slope coefficients, bt ................................. 37
Table 12 Momentum by Credit Risk Group and by Size/Volatility/Leverage ............ 40
Figure Index
Figure 1 : Overlapping method ...................................................................................... 9
Figure 2 : Operating Performance Trend (Sales Growth) ............................................ 31

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