Do the Factor-Based Strategies Deliver in Korean Stock Market

Abstract

This paper measures the significance of returns from factor-based strategies in Korean Stock market. The assessment of the significance employs the differences in the returns of long-short portfolios constructed upon five main factors introduced in many finance papers: volatility, value, size, liquidity, and quality, and that in Sharpe ratios of those portfolios. Although most of the factor-based strategies show no significant result, some factor-based strategies show positive average return with improved volatility. The reason for lack of statistical results possibly attributes to the shortage of data since the stock data after 2000 in Korean market is reliable.