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The efficiency of financial markets: A dual momentum trading strategy on the Swedish stock market
Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Economics.
2018 (English)Independent thesis Advanced level (degree of Master (One Year)), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

An interesting topic in the financial world is whether the markets are efficient or if the deviate from a random walk. There have been numerous studies on this topic, investigating if technical trading strategies can be used to create excess returns in the stock market. Among those technical trading strategies are the dual momentum strategy, the one that have been examined in this study. The study aims to answer whether the Swedish stock market are efficient or not and this is done by applying the dual momentum trading strategy on Swedish stock data. The data that are used is daily closing prices for the OMXS30, ranging from 2009 to 2018. The dual momentum strategy is also investigated using a band width o 1 % around both the shorter moving average and the longer moving average. The model’s value at risk are tested using a bootstrap methodology and their returns are compared to the returns of a buy and hold strategy on the OMXS30, using a bootstrap methodology and a t-test. Finally, to get a risk adjusted measure of the strategies return, the Sharpe Ratio are used.

The findings of this study are that some of the trading models could generate a higher risk adjusted rate of return than the buy and hold strategy. Further, it seems like the band width have a positive impact on respective strategy’s return. The value at risk are rather high for the dual momentum trading strategies compared to the buy and hold strategy. Finally, we cannot find any significant differences between the mean returns of the trading strategies and the mean returns of the buy and hold strategy, meaning we cannot reject the efficient market hypothesis, hence, indicating an efficient market.

Place, publisher, year, edition, pages
2018.
National Category
Economics
Identifiers
URN: urn:nbn:se:umu:diva-153009OAI: oai:DiVA.org:umu-153009DiVA, id: diva2:1260149
Available from: 2018-11-01 Created: 2018-11-01 Last updated: 2018-11-01Bibliographically approved

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CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf