Insights

In our previous article" Shipping Leads, Semiconductors Follow? "we identified a recurring pattern in Taiwan’s market: rallies in the shipping sector often precede gains in semiconductor stocks. This article builds on that insight by transforming the observed rotation sequence into a quantitative investment strategy.

In the previous study, we examined the Capital Gain Overhang (CGO) factor, designed to capture the behavioral bias known as the Disposition Effect. By measuring the gap between current market prices and investors’ average cost basis, CGO quantifies unrealized gains and losses at the market level. Empirical tests in Taiwan’s equity market confirmed that CGO is a meaningful predictor of future returns: high-CGO stocks consistently outperformed low-CGO stocks, generating significant positive alpha beyond standard Fama–French models, especially over medium- to long-term horizons.

The origins of the momentum anomaly have long been debated, with multiple competing explanations. Among them, one of the most influential behavioral interpretations attributes momentum to the Disposition Effect, a systematic bias in investor decision-making. This article focuses on the Capital Gain Overhang (CGO) factor, specifically designed to quantify this behavioral bias. Using the Taiwan equity market as a case study, we examine CGO’s predictive power as a stock selection indicator and evaluate its practical value through empirical analysis.

Analyze industry rotation between Taiwan’s shipping and semiconductor sectors using momentum and valuation factors. This study reveals how factor-based strategies capture cyclical shifts—and why semiconductors ultimately outperformed over time.

Discover how Robert Gaddie’s stock-picking method helps uncover hidden small-cap growth gems in Taiwan’s market. This strategy targets under-the-radar companies with earnings momentum and delivers strong backtested returns.

Discover how Peter Lynch’s legendary investment philosophy can be applied to Taiwan’s stock market. This article builds a quantitative GARP strategy using TEJ data to identify undervalued growth stocks—and tests its performance over seven years.

Discover how Derwood Chase’s value-momentum strategy—favoring low P/E stocks with strong price trends—delivers long-term outperformance in Taiwan’s market. Backtest results show strong alpha and lower drawdowns, proving the power of disciplined factor investing.

Discover how TEJ’s ex-dividend event data and financial indicators help forecast stock rebound probability. Learn to identify high-yield Taiwan stocks with stronger post-dividend performance using TEJ’s point-in-time quantitative datasets.

Rothman's core investment philosophy is to “buy right and hold tight” or “buy strong and hold long.” He emphasizes selecting financially sound companies with stable and growing earnings, purchasing them at the right price, and holding them patiently for the long term. Without frequent portfolio adjustments, investors can achieve strong long-term returns. This simple yet resolute investment approach reflects Rothman’s practical wisdom and provides a clear, historically validated foundation for the strategy tested in this study.