Abstract

Behavioral finance is a new in the financial theories area that is endeavoring to elaborate the financial markets’ disorders via discarding the assumptions of the modern financial theories conveying the perfect intellectuality of the economic factors and market efficiency. The momentum effect bearing the meaning of the continuation of the price trend in the mid-term is inter alia these abnormalities. The elucidation of this phenomenon and investigation of the variables effective thereon have been the subject matters to a great many of research papers. The current research paper aims at investigating the relationship between the momentum return strategy and liquidity in Tokio’s stock exchange market. To do so, the method proposed by Jigadish and Titman (1991) was applied for the formation of a portfolio. The results obtained are suggestive of the nonexistence of any relationship between the stock liquidity and momentum return portfolio.