Can small investors exploit the momentum effect?

Antonios Siganos ()

Financial Markets and Portfolio Management, 2010, vol. 24, issue 2, 192 pages

Abstract: This study uses UK data and investigates whether small investors can exploit the continuation effect in share prices. Individual traders are not in a financial position to buy and sell short hundreds of firms, as suggested by existing academic research, and thus this study uses extreme performance companies to implement the strategy. We find that strong momentum gains appear when extreme winners and losers are employed. These returns remain strong even after considering the transaction costs of implementing such strategies, including commissions, stamp duty, selling-short costs, and bid-ask spread. Overall, we show that a relatively large number of small investors can enjoy momentum gains, providing some evidence against stock market efficiency. Copyright Swiss Society for Financial Market Research 2010

Keywords: Stock market efficiency; Momentum effect; Transaction cost; G14; G11 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (12)

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DOI: 10.1007/s11408-009-0120-3

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