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Momentum, or the basic idea of the momentum effect in finance, is that there is a tendency for rising asset prices to continue rising, while the falling prices continue to fall. As such, a momentum strategy is based on the idea that previous returns will predict future returns. In order to follow this line of thought, a momentum strategy is generally based on buying past winners and taking short positions in past losers. This quantitative study addresses the phenomenon of momentum crashes, which is a moment in time when a momentum strategy fails, and past losers outperform past winners. In our study we are setting out to study the momentum crash phenomenon during the years of 2006-2012 on NASDAQ OMX Stockholm, focusing specifically on the Small- and Large Cap segments. As we intend to explore the concept of momentum crashes as thoroughly as possible, we will also be researching momentum itself during this time period, as these two concepts are inevitably intertwined. In order to do this, we will be applying commonly used portfolio construction methods used in previous momentum research. These portfolios will be based on past winners and past losers, and their performance will then be tracked for different lengths of time, which will allow us to identify points in time where momentum crashes have occurred. What we found in our research was that, while we gathered data indicative of momentum trends during our chosen time period, we could not prove that momentum existed to any statistically meaningful degree. As for momentum crashes, we identified many different points in time where the past-loser portfolios outperformed the past-winner portfolios, thus resulting in negative winner-minus-loser portfolios and momentum crashes. The most interesting aspect of these findings was that the highest frequencies of momentum crashes were found in the years of 2008 and 2009, where we made the most negative winner-minus-loser portfolio observations. This finding is in line with similar research on other populations, as momentum crashes are theorized to occur at a higher frequency during times of market stress and high volatility. Furthermore, we also made some interesting connections between our findings and behavioral finance; we identified certain patterns which could be indicative of a relationship between the two. As for the research gap and the ultimate contribution of this study, we have increased the knowledge, understanding and awareness of momentum crashes in Sweden, and we have shown during which times these are likely to occur in a Swedish context. Additionally, we have also increased the general knowledge of momentum by exploring it from a Swedish perspective.

This thesis examines if price momentum and momentum in firm fundamentals measured by earnings and revenue momentum are related on the Swedish stock market. Price momentum is measured through the 11-month prior performance (11MPM), Earnings Momentum through Standardized Unexpected Earnings (SUE), and Revenue Momentum through Standardized Unexpected Revenue Growth (SURGE). Using firm-level data from 2007 until 2024, zero-investment momentum strategies are established and show significant returns not explained by any conventional asset pricing model. There is a strong dominance of the earnings momentum strategy, by wide margin outperforming both price and revenue momentum. The abnormal price momentum profits disappear when controlling for earnings momentum returns, whereas the returns to earnings momentum remain robust after controlling for the price momentum. These results support the claim that price momentum is a weak manifestation of fundamental momentum. The revenue momentum returns are not explained by earnings momentum, which indicates that these performance metrics contain exclusive information about the fundamental performance of a firm.

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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.

An extensive body of research supports the momentum strategy's persistence but disagrees on the underlying source of its profitability. A key obstacle to distinguishing between behavioral and rational explanations of momentum is that mispricing is unobservable. This dissertation studies the endogenous relationship between momentum trading and mispricing. The basic idea is that momentum trades can impede arbitrage when they are in the opposite direction of arbitrage trades and reinforce arbitrage when they are in the same direction. A simple model suggests that when momentum trades reinforce the arbitrage process, momentum strategy returns contain relatively less mispricing than when momentum trades impede the arbitrage process. Empirical results show that an arbitrage-reinforcing strategy has significantly higher average returns that are largely related to risk and do not reverse in subsequent periods, while an arbitrage-impeding strategy exhibits significant long-term reversal consistent with more mispricing. Additional tests show that winners have higher future growth rates than losers consistent with cross-sectional differences in expected returns. Overall, the evidence suggests that momentum profitability is largely related to risk which is partially masked by mispricing. An important implication of this model is that, like noise traders, trading strategies that do not condition on relative value can impede arbitrage.

The fluid forces on a single cylinder in cross flow are measured experimentally by strain gauges. The drag and lift coefficients of the cylinder are measured with momentum injection of various direction and magnitude. The results show that the drag coefficient of the cylinder is reduced with momentum injection. For higher Reynolds numbers, the magnitude of momentum injection must be increased to maintain the effectiveness of momentum injection. The influence of the drag coefficient is reduced when the angle of momentum injection is increased, and then the lift coefficient is varied obviously.

Particle image velocimetry was widely used in many kinds of flow field recently. It provides a global view of instantaneous fluid velocity without disturbs flow field. In the present study, the cylinder wake with momentum addition was measured by PIV. The Reynolds number was fixed at 465 and 535 with cylinder diameter 19mm. The flow¡¦s displacement was measured by tracking flow images of 50 diameter ployamid 12 particles. The mean velocity of the momentum interference from the cylinder surface were 21 and 52 mm/s, respectively. From the results, the wake region shrinks under momentum injection at 0˚, but enlarges at 30˚ to 90˚. Under momentum suction, the effect of the wake expands at 0˚. Although the down stream velocity becomes more uniform at 30˚ and 60˚, the wake region spreads when suction at 90˚. On the other hand, the velocity spectra by hot-film anemometry also give consistent results with PIV analysis.