Abstract Market efficiency is a highly debated topic within the academic research field of finance. Several studies have presented that the return on stocks may be predictable by employing the momentum investment strategy, which contradicts the Efficient Market Hypothesis in exchange market. There is extensive international evidence, on an academic level that the momentum investment strategy yields positive abnormal returns when short-term periods are considered. This paper examines the profitability of the momentum investment strategy in Canadian and Swedish stock markets during January 2000 to December 2006. To investigate the strategy, two separate portfolios of winners and losers, each portfolio containing 50 stocks, are created for each market. Then the momentum strategy, which consists in long position in past best performing stocks and short positions in past worst performing stocks, is run for each exchange market. Results show that the strategy generates statistical significance at the 5% level for Canadian market for 9-month holding period, and with the level of significance at the 10% for Swedish market for the 6 and 9-month holding periods after excluding the data for the year 2002. Moreover, results show that the strategy is even stronger in the level of significance during the bull trend of the markets. The paper confirms the existence of the momentum anomaly in TSX and SSE.
| Identifer | oai:union.ndltd.org:UPSALLA1/oai:DiVA.org:umu-1824 |
| Date | January 2008 |
| Creators | Ludvigsson, Anita |
| Publisher | Umeå universitet, Handelshögskolan vid Umeå universitet, Umeå : Handelshögskolan vid Umeå universitet |
| 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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