Abstract: The problem. Since 1990, Taiwan's market has seen some of the fastest growth of the Asian economies. However, the Taiwan Stock Exchange (TSE) still faces conditions different from those of the stock markets of developed nations. Based on prior research, this study examines the application of momentum and contrarian trading and portfolio strategies by investors in the Taiwan stock exchange (TSE), to determine if a combined momentum and contrarian strategy can produce better returns than either a pure momentum or contrarian trading strategy. This study also considers trading volume and institutional investment in the context of TSE trading strategies. Additionally, the study follows a three-factor model to determine whether return reversal exists in TSE or not. Method. Using an empirical research design derived from prior research, the current study develops a portfolio model and tests its validity using data from the TSE. The research focuses on establishing means of comparing trading strategies over various time periods. The research design can be considered non-experimental in nature, as it primarily tests whether data retrospectively gathered from the TSE supports the explanatory model of stock and investor behavior under consideration. The study developed 5 research questions with 15 hypotheses based on some of the models used by previous researchers, and tested these hypotheses using data obtained from the Taiwan Economic Journal's TSE reports. The study focuses on the period of January 1990 and December 2005, though it is limited from August 2000 to December 2005 in its data about institutional investors. Results. The study's findings indicated: (a) Momentum strategy does not prevail in the TSE. (b) In shorter holding periods of up to 12 months, a hybrid strategy in the TSE could yield higher returns than either a pure contrarian or a pure momentum trading strategy. (c) Trading volume (turnover rate) is useful for predicting cross-sectional returns for portfolios with different ranking and holding periods. (d) TSE does not adopt positive feedback trading by institutional activity in comparison to markets where the volume of institutional activity is higher. (e) The three factor model explains not only long-term reversal in the TSE (e.g. holding periods of 36 to 60 months) but also intermediate-term reversal (e.g. holdings period of 9 to 24 months).