Background: Buying past winners and selling past losers has historically generated both profits and losses. The momentum strategy has been researched with risk measures and portfolio creation as fundamental components. While no definitive framework exists, prior research has explored industry segmentation within portfolio construction but has yet to reach a clear conclusion. Purpose: The purpose is to determine if there is a significant momentum effect in industry-portfolios, and if some industries are more prone to momentum strategy than others. Method: The research followed a positivistic paradigm with deductive reasoning using a quantitative approach. Secondary data of industry returns for 30 industries from the American stock market is collected from Kenneth R French database. The portfolios are analyzed from a statistical perspective to draw conclusions of the market anomaly. Findings: Three hypotheses were formed to address the research question and purpose. The winner-portfolio yielded significant raw returns in 14 of 16 tests for various periods, while loser and winner-loser portfolios showed negative raw returns. Accounting for systematic risk generated significant profits for all the winner portfolios. Further, industry-specific momentum was examined, revealing no momentum in some industries and momentum in others. Conclusion: We find evidence that the industry portfolio can generate significant excess return over the market for 3–12-month periods, that can't be explained by the assets systematic risks. The study concludes that while industry-specific momentum is a viable strategy for diversification and capturing winners, its effectiveness varies across industries and has shown diminishing excess returns over the past two decades.
| Identifer | oai:union.ndltd.org:UPSALLA1/oai:DiVA.org:hj-60916 |
| Date | January 2023 |
| Creators | Estéen, Oscar, Landahl, Jonathan, Karlsson, Hugo |
| Publisher | Jönköping University, IHH, Företagsekonomi |
| Source Sets | DiVA Archive at Upsalla University |
| Language | English |
| Detected Language | English |
| Type | Student thesis, info:eu-repo/semantics/bachelorThesis, text |
| Format | application/pdf |
| Rights | info:eu-repo/semantics/openAccess |
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