The Post-Cost Profitability of Momentum Trading Strategies: Further Evidence from the UK
Abstract"This paper examines the post-cost profitability of momentum trading strategies in the UK over the period 1988-2003 and provides direct evidence on stock concentration, turnover and trading cost associated with the strategy. We find that after factoring out transaction costs the profitability of the momentum strategy disappears for shorter horizons but remains for longer horizons. Indeed, for ranking and holding periods up to 6-months, profitable momentum returns would not be available to most average investors as the cost of implementation outweighs the possible returns. However, we find post-cost profitability for ranking and/or holding periods beyond 6 months as portfolio turnover and its associated cost reduces. We find similar results for a sub-sample of relatively large and liquid stocks." Copyright 2007 The Author Journal compilation (c) 2007 Blackwell Publishing Ltd.
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Bibliographic InfoArticle provided by European Financial Management Association in its journal European Financial Management.
Volume (Year): 13 (2007)
Issue (Month): 4 ()
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=1354-7798
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- Antonios Siganos, 2010. "Can small investors exploit the momentum effect?," Financial Markets and Portfolio Management, Springer, vol. 24(2), pages 171-192, June.
- Badreddine, Sina & Galariotis, Emilios C. & Holmes, Phil, 2012. "The relevance of information and trading costs in explaining momentum profits: Evidence from optioned and non-optioned stocks," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(3), pages 589-608.
- Mazouz, Khelifa & Joseph, Nathan L. & Joulmer, Joulmer, 2009. "Stock price reaction following large one-day price changes: UK evidence," Journal of Banking & Finance, Elsevier, vol. 33(8), pages 1481-1493, August.
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