Momentum Around the Globe. The Pervasiveness of the Momentum Effect in Relative Stock Performance PDF Download

Author: Andra Musat
Publisher: GRIN Verlag
ISBN: 3656976724
Category : Business & Economics
Languages : en
Pages : 22

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Book Description
Seminar paper from the year 2015 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 2,0, University of Mannheim, course: Behavioral Finance, language: English, abstract: Extensive research has been dedicated to the momentum effect in the past two decades since it was first documented in 1993 by Jegadeesh and Titman. Put simply, momentum can be understood as persistence in relative stock performance: stocks which have performed well over the past three to twelve months continue to outperform stocks which have performed poorly over the next three to twelve months. The aim of this paper is to gather, compare and evaluate the available evidence so far to show that momentum is effective globally, with a focus on analyzing co-movement. Besides the geographical dimension, the paper will also look at the extent to which profitable momentum returns are prevalent in time and are not only confined to stocks, but are characteristic for much more asset classes. As such, the main contribution of the paper is the brief analysis of the pervasiveness of the momentum effect along three dimensions: geographical, temporal and across asset classes.

Author: Stephen Satchell
Publisher: John Wiley & Sons
ISBN: 1119599326
Category : Business & Economics
Languages : en
Pages : 448

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Book Description
A one-of-a-kind reference guide covering the behavioral and statistical explanations for market momentum and the implementation of momentum trading strategies Market Momentum: Theory and Practice is a thorough, how-to reference guide for a full range of financial professionals and students. It examines the behavioral and statistical causes of market momentum while also exploring the practical side of implementing related strategies. The phenomenon of momentum in finance occurs when past high returns are followed by subsequent high returns, and past low returns are followed by subsequent low returns. Market Momentum provides a detailed introduction to the financial topic, while examining existing literature. Recent academic and practitioner research is included, offering a more up-to-date perspective. What type of book is Market Momentum and how does it serve a range of readers’ interests and needs? A holistic market momentum guide for industry professionals, asset managers, risk managers, firm managers, plus hedge fund and commodity trading advisors Advanced text to help graduate students in finance, economics, and mathematics further develop their funds management skills Useful resource for financial practitioners who want to implement momentum trading strategies Reference book providing behavioral and statistical explanations for market momentum Due to claims that the phenomenon of momentum goes against the Efficient Markets Hypothesis, behavioral economists have studied the topic in-depth. However, many books published on the subject are written to provide advice on how to make money. In contrast, Market Momentum offers a comprehensive approach to the topic, which makes it a valuable resource for both investment professionals and higher-level finance students. The contributors address momentum theory and practice, while also offering trading strategies that practitioners can study.

Author: Wesley R. Gray
Publisher: John Wiley & Sons
ISBN: 1119237254
Category : Business & Economics
Languages : en
Pages : 198

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Book Description
The individual investor's comprehensive guide to momentum investing Quantitative Momentum brings momentum investing out of Wall Street and into the hands of individual investors. In his last book, Quantitative Value, author Wes Gray brought systematic value strategy from the hedge funds to the masses; in this book, he does the same for momentum investing, the system that has been shown to beat the market and regularly enriches the coffers of Wall Street's most sophisticated investors. First, you'll learn what momentum investing is not: it's not 'growth' investing, nor is it an esoteric academic concept. You may have seen it used for asset allocation, but this book details the ways in which momentum stands on its own as a stock selection strategy, and gives you the expert insight you need to make it work for you. You'll dig into its behavioral psychology roots, and discover the key tactics that are bringing both institutional and individual investors flocking into the momentum fold. Systematic investment strategies always seem to look good on paper, but many fall down in practice. Momentum investing is one of the few systematic strategies with legs, withstanding the test of time and the rigor of academic investigation. This book provides invaluable guidance on constructing your own momentum strategy from the ground up. Learn what momentum is and is not Discover how momentum can beat the market Take momentum beyond asset allocation into stock selection Access the tools that ease DIY implementation The large Wall Street hedge funds tend to portray themselves as the sophisticated elite, but momentum investing allows you to 'borrow' one of their top strategies to enrich your own portfolio. Quantitative Momentum is the individual investor's guide to boosting market success with a robust momentum strategy.

Author: Heinrich Stilling
Publisher: GRIN Verlag
ISBN: 3346038300
Category : Business & Economics
Languages : en
Pages : 44

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Book Description
Bachelor Thesis from the year 2013 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 1,7, University of Mannheim, language: English, abstract: This paper focuses on the structures and characteristics that underlie the periods of extremely poor momentum performance and sets a special focus on the latest 2009 momentum crash period. It answers questions regarding the momentum portfolio composition during this period and quantitatively evaluates the momentum portfolio, measuring commonly applied performance indicators. The results are then contrasted with a non-crash benchmark period. The momentum strategy is a simple yet powerful trading strategy. Momentum implies that past stock prices can predict future stock price development. According to momentum theory, past winner stocks are likely to continue their good performance while past loser stocks are likely to continue to perform poorly. Hence, applying this strategy, investors buy stocks that have risen in the past the strongest and (short) sell those that have declined in value the most. This very simple decision rule is practically the only important guideline to follow regarding the momentum strategy. Surprisingly and in spite of its simplicity, momentum works and yields high excess returns. Over the 1927 to 2012 period, the portfolio of past winner stocks yields an annualized excess return of 7.157% compared to the market portfolio. Even though momentum usually performs exceptionally well, it does not offer free lunch. In the 1927 to 2012 time frame, there are a few periods of extreme momentum underperformance that could have wiped out some significant wealth. For instance, during the most recent 2009 momentum crash, this strategy would have erased 104.28% of an initial investment in just 3 months.

Author: John B. Guerard, Jr.
Publisher: Springer
ISBN: 3319339761
Category : Business & Economics
Languages : en
Pages : 480

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Book Description
This volume, inspired by and dedicated to the work of pioneering investment analyst, Jack Treynor, addresses the issues of portfolio risk and return and how investment portfolios are measured. In a career spanning over fifty years, the primary questions addressed by Jack Treynor were: Is there an observable risk-return trade-off? How can stock selection models be integrated with risk models to enhance client returns? Do managed portfolios earn positive, and statistically significant, excess returns and can mutual fund managers time the market? Since the publication of a pair of seminal Harvard Business Review articles in the mid-1960’s, Jack Treynor has developed thinking that has greatly influenced security selection, portfolio construction and measurement, and market efficiency. Key publications addressed such topics as the Capital Asset Pricing Model and stock selection modeling and integration with risk models. Treynor also served as editor of the Financial Analysts Journal, through which he wrote many columns across a wide spectrum of topics. This volume showcases original essays by leading researchers and practitioners exploring the topics that have interested Treynor while applying the most current methodologies. Such topics include the origins of portfolio theory, market timing, and portfolio construction in equity markets. The result not only reinforces Treynor’s lasting contributions to the field but suggests new areas for research and analysis.

Author: Mark Grinblatt
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 43

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Book Description
Prior experimental and empirical research documents that many investors have a lower propensity to sell those stocks on which they have a capital loss. This behavioral phenomenon, known as 'the disposition effect, ' has implications for equilibrium prices. We investigate the temporal pattern of stock prices in an equilibrium that aggregates the demand functions of both rational and disposition investors. The disposition effect creates a spread between a stock's fundamental value -- the stock price that would exist in the absence of a disposition effect -- and its market price. Even when a stock's fundamental value follows a random walk, and thus is unpredictable, its equilibrium price will tend to underreact to information. Spread convergence, arising from the random evolution of fundamental values, generates predictable equilibrium prices. This convergence implies that stocks with large past price runups and stocks on which most investors experienced capital gains have higher expected returns that those that have experienced large declines and capital losses. The profitability of a momentum strategy, which makes use of this spread, depends on the path of past stock prices. Crosssectional empirical tests of the model find that stocks with large aggregate unrealized capital gains tend to have higher expected returns than stocks with large aggregate unrealized capital losses and that this capital gains 'overhang' appears to be the key variable that generates the profitability of a momentum strategy. When this capital gains variable is used as a regressor along with past returns and volume to predict future returns, the momentum effect disappears

Author:
Publisher:
ISBN:
Category :
Languages : en
Pages : 169

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Book Description
One of the most controversial topics in recent investment literature has been stock return momentum. If an investor buys past winners and sells past losers, he will earn positive profits in the intermediate-term horizon (3 to 12 months). While behavioral theories seem to dominate as an explanation for the momentum phenomenon since momentum has been regarded as direct counter evidence for the efficient market hypothesis, Chordia and Shivakumar (2002) find that momentum can be explained by a set of macroeconomic variables. Chordia and Shivakumar argue that momentum is caused by time-varying expected returns that can be predicted by a set of macroeconomic variables, which might be associated with time-varying risk. However, the first essay of my dissertation shows that even if the macroeconomic variables are independent of stock returns, they can appear to predict momentum profits if they exhibit high persistence and the momentum portfolio period overlaps with the parameter estimation period. I am able to produce results similar to those of Chordia and Shivakumar with randomly generated variables, while I show that once the parameter estimation periods are changed, the predictive power of the macroeconomic variables for momentum disappear. My results provide evidence that the predictive power of the macroeconomic variables comes from a spurious relation between stock returns during the momentum portfolio formation period and predicted returns from the macroeconomic variables. My results further suggest that Chordia and Shivakumar's argument that the predictive power of macroeconomic variables for momentum is a challenge to behavioral theories is indeed premature. The second essay shows that the ratio of the 50-day moving average to the 200-day moving average has significant predictive power for future returns. Stocks with a high moving average ratio tend to outperform stocks with a low moving average ratio for the next six months. This predictive power is distinct from that of the nearness of the current price to the 52-week high, which was first documented by George and Hwang (2004). The moving average ratio, combined with the nearness to the 52-week high, can explain most of the intermediate-term momentum profits. This suggests that an anchoring bias in which investors use moving averages and the 52-week high as their reference points for estimating fundamental values is the main source of momentum effects. Momentum profits caused by the anchoring bias do not disappear in the long-run, confirming George and Hwang's argument that intermediate-term momentum and long-term reversals are separate phenomena.

Author: Ian D'Souza
Publisher:
ISBN:
Category :
Languages : en
Pages : 53

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Book Description
This study documents the significant profitability of “time-series momentum” strategies in individual stocks in the US markets from 1927 to 2014 and in international markets since 1975. Unlike cross-sectional momentum, time-series stock momentum performs well following both up- and down-market states, and it does not suffer from January losses and market crashes. An easily formed dual-momentum strategy, combining time-series and cross-sectional momentum, generates striking returns of 1.88% per month. We test both risk based and behavioral models for the existence and durability of time-series momentum and suggest the latter offers unique insights into its continuing factor dominance.

Author: Yasser Alhenawi
Publisher:
ISBN:
Category :
Languages : en
Pages : 38

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Book Description
This paper uses a sample of firms listed in the NYSE, AMEX, and NASDAQ between January 1963 and December 2012 to analyze the interaction between size effect and momentum effect in cross-sectional stock returns. Furthermore, this paper focuses on the evolution of this interaction through different market states. I report a significant shift in stock returns structure during the rising markets of the 1990s and the 2000s. First, momentum has absorbed the size effect. Second, the momentum effect has become stronger in larger, not smaller, firms. These patterns are indicative of a strong interaction between the two effects. Conceivably, in up markets, firms grow fast, and thus, the size and momentum effects stem from a common economic phenomenon: growth. The findings are robust to variations in the length of the formation period and to the use of residual return (instead of total return) to rank stocks.

Author: Adam Zaremba
Publisher:
ISBN:
Category :
Languages : en
Pages : 20

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Book Description
The aim of this paper is to investigate the momentum effect in country-level anomalies in global equity markets. By using a sample of 78 countries for the period from 1995 to 2015, we test a set of potential 40 cross-sectional inter-market anomalies, some of which had never been examined before. Based on the findings, according to which half of these return patterns serve as reliable and robust sources of returns, we provide convincing evidence that the anomalies with good performance over the past 6-12 months tend to outperform in the future. Furthermore, the study shows that returns on individual country-level strategies are weakly correlated. Consequently, developing a portfolio consisting of past top-performing strategies may constitute a valuable approach for international investors.