Beating the DAX, MDAX, and SDAX: investment strategies in Germany

Friedrich-Carl Franz () and Tobias Regele ()
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Friedrich-Carl Franz: University of Mannheim
Tobias Regele: University of Mannheim

Financial Markets and Portfolio Management, 2016, vol. 30, issue 2, No 3, 204 pages

Abstract: Abstract Motivated by two recent papers of Asness et al. (J Portf Manag Fall 40(5):75–92, 2014; J Portf Manag Fall 42(1):34–52, 2015), we investigate whether momentum and value strategies outperformed a buy-and-hold strategy in the three biggest German equity indices, DAX, MDAX, and SDAX from 1988 to 2015. Our findings show that a momentum premium was present only in the SDAX and that value strategies did not work in any of the three indices. Consequently, we conclude that at least the DAX and MDAX are efficient indices and that some supposedly abnormal returns could be illusionary, as limits to arbitrage obstruct any profitable exploitation in practice. Finally, we find a negative correlation between momentum and value in the DAX and show that mixing both strategies can substantially decrease a portfolio’s risk.

Keywords: Efficient markets; Momentum effect; Value effect (search for similar items in EconPapers)
JEL-codes: G11 G12 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s11408-016-0268-6

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