Momentum Investment Strategy: (An Empirical Study of the Canadian Stock Market and the Swedish Stock Market)
Independent thesis Advanced level (degree of Master (One Year)), 15 credits / 22,5 HE creditsStudent thesis
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.
Place, publisher, year, edition, pages
Umeå: Handelshögskolan vid Umeå universitet , 2008. , 54 p.
Momentum strategy, Canadian stock market, Swedish stock market
IdentifiersURN: urn:nbn:se:umu:diva-1824OAI: oai:DiVA.org:umu-1824DiVA: diva2:142131
Isaksson, Anders, Assistant Professor
Gällstedt, Margareta, Director of studies