Momentum: Strategies, Size and Risk Factor

João Alberto Contim Martins (), Francisco Vitorino da Silva Martins () and Elísio Fernando Moreira Brandão ()
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João Alberto Contim Martins: FEP-UP, School of Economics and Management, University of Porto
Francisco Vitorino da Silva Martins: FEP-UP, School of Economics and Management, University of Porto
Elísio Fernando Moreira Brandão: FEP-UP, School of Economics and Management, University of Porto

FEP Working Papers from Universidade do Porto, Faculdade de Economia do Porto

Abstract: This study aims to understand what the actual impact of the momentum anomaly on the financial markets. Based on the profitability of sixteen momentum strategies for the German market, it appears that strategies with short formation and holding periods produce attractive returns for the investors. However, it is shown that a considerable amount of the results of these strategies is justified by the systematic risk. It also studied the relationship between firm’s size and results of momentum strategies. According to this study, the momentum is stronger in firms with low market value, but the returns of their strategies are smaller for this group of firms. Finally, it analyzed the ability of the momentum to explain the variation in stock returns. The results show that the inclusion of the momentum variable in asset pricing models does not increase their efficiency.

Keywords: Momentum Strategies; Systematic Risk; Firms Size; Stock Returns (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 G15 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2016-11
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