Three Essays on Momentum Returns PDF Download

Author: Muhammad A. Cheema
Publisher:
ISBN:
Category :
Languages : en
Pages : 145

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Author: Muhammad Ahmad Cheema
Publisher:
ISBN:
Category : Stocks
Languages : en
Pages : 270

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Author: Jun Wang
Publisher:
ISBN:
Category : Electronic dissertations
Languages : en
Pages : 92

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Essay 1, Growth/Value, Market-Cap, and Momentum, examines the profitability of style momentum strategies on portfolios based on firm growth/value characteristics and market capitalization. We use monthly total returns of nine S & P style indices to avoid concerns about firm size, liquidity, credit risk, short-sale constraints, and transaction costs. We find that historically buying a past best performing style index and short-selling a past worst performing style index generates economically and statistically significant profit of 0.8% per month over the period June 1995 to March 2009. This profitability remains economically plausible after adjusting for systematic risk, short-sale costs, and transaction costs. Investors may actually implement style momentum strategies on exchange traded funds linked to the S & P style indices. Essay 2, Sector Momentum, examines monthly returns of nine Select Sector SPDRs and finds historically buying past outperforming sectors and selling past underperforming sectors produces economically and statistically significant profits. Investors may be able to not only benefit from SPDRs' low fees, tax efficiency, and trading flexibility, but also exploit SPDRs as asset allocation tools to earn excess returns on sector momentum. For robustness checks, I test sector momentum investing strategies on CRSP listed individual stocks between January 1963 and December 2008 using Global Industry Classifications Standard (GICS) and also find statistically significant payoffs. Essay 3, Momentum Strategies on Global ETFs, examines the price momentum on 15 well-diversified iShares MSCI Country Index ETFs from April 1996 to December 2006. I find statistically and economically significant profits for some momentum strategies: long past winners and short past losers. The results are robust to trading costs and excessive risks.

Author: Yu Zhang
Publisher:
ISBN:
Category :
Languages : en
Pages : 145

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This dissertation studies the sources of the momentum abnormal returns. The first essay attempts to find the relative role of cross-sectional and time-series variances in generating returns from the momentum strategy. By decomposing the returns from the momentum strategy both theoretically and empirically, the first essay finds that own-stock autocovariance is an important source in generating momentum returns. More interestingly, the own-stock autocovariance comes primarily from the loser portfolio. This finding provides another explanation to the recent finding that the loser portfolio is the driving force of the momentum abnormal returns. Based on the above discovery from the first essay, the second essay attempts to find out the underlying reason for the important asymmetric own-stock autocovaraince from the loser portfolio. We find that this return predictability comes from the short-selling constraints and risks. Stocks with more severe short-selling constraints prevent pessimistic information from being released into the stock prices more quickly; and thus causes those stocks to be overpriced and auto-correlated in their returns.

Author: Abdullah Alsubaie
Publisher:
ISBN: 9780549083276
Category : Stock exchanges
Languages : en
Pages : 143

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The second essay examines the relationship between abnormal changes in trading volume of both firms and portfolio levels, and the short-term price autoregressive behavior in the SSM. The objective is to investigate the informational role that trading volume plays in predicting the direction of short-term returns. I evaluate whether the abnormal change in lagged, contemporaneous, and lead turnover affects serial correlation in returns. Consistent with the prediction of Campbell, Grossman, and Wang (1993) model, the result of this essay indicates that lagged abnormal change in trading volume lead to reversal in consecutive weekly returns. Contemporaneous and lead changes in volume provide mixing results.

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

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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: Hong-Yi Chen
Publisher:
ISBN:
Category : Cash management
Languages : en
Pages : 209

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This dissertation includes three essays which investigate momentum strategies, dividend policy, and asset pricing test. The brief abstracts of these three essays are presented as follows. The first essay investigates the existence of revenue momentum strategy and the interrelationship among revenue, price, and earnings momentum strategies. Empirical results indicate that prior returns, earnings surprises and revenue surprises each carries some exclusive information content that is not fully priced by the market. This essay also finds that the market generally underestimates the joint information associated with prior returns, earnings surprises, and revenue surprises. This further leads to a profitable combined momentum strategy, which exploits all three information and yields a monthly return as high as 1.57%. The second essay studies the theoretical and empirical issues of a firm's dividend policy. This essay theoretically extends the proposition of DeAngelo and DeAngelo's (2006) optimal payout policy in terms of the flexibility dividend hypothesis. Using data collected in the U.S. from 1969 to 2009, this essay investigates the impact of growth rate, systematic risk, and total risk on the optimal payout ratio in terms of the fixed-effect model. Results show that a company will reduce its payout when the growth rate increases for the consideration of flexibility, and a nonlinear relationship exists between the payout ratio and the risk. The theoretical model and empirical results can therefore be used to identify whether flexibility or the free cash flow hypothesis should be used to determine the dividend policy. The third essay investigates how measurement errors associated to the market rate of return and estimated beta can affect the capital asset pricing model test. This essay further studies three errors-in-variables estimation models which include grouping method, instrumental variable method, and maximum likelihood method. Using U.S. individual stock and market index data during 1931 to 2009, this essay empirically examines various errors-in-variables estimation methods in testing capital asset pricing model. Empirical results support the role of the market beta in the capital asset pricing model after adjusted by errors-in-variables models.

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

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Author: Grant Richard McQueen
Publisher:
ISBN:
Category : Rate of return
Languages : en
Pages : 436

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Author: Tse-Chun Lin
Publisher: Rozenberg Publishers
ISBN: 9036101514
Category :
Languages : en
Pages : 146

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