Exploring the Momentum Strategy

Detta är en C-uppsats från Handelshögskolan i Stockholm/Institutionen för finansiell ekonomi

Sammanfattning: During different periods in history, buying past winners and selling past losers have proven a profitable strategy when applied to portfolios consisting of stocks. Naturally, if such an opportunity exists it should after a while disappear as arbitrageurs profit. The aim of this thesis is to further test this momentum strategy on the US large capitalized stock market to understand if the behavior is still there. By introducing dynamic holding periods to replace the more conventional fixed holding periods we also test if an adjusted momentum strategy yields similar results. The main result is that we fail to find momentum strategies that generate abnormal returns. Instead, some support of contrarian behavior is found.

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