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Feasible momentum strategies in the US stock market

Author

Listed:
  • Manuel Ammann
  • Marcel Moellenbeck
  • Markus M Schmid

    (University of Mannheim, Finance Area, Chair for Business Administration and Corporate Governance,)

Abstract

Although there is a large literature documenting the profitability of momentum strategies, their implementation is afflicted with many difficulties. Most importantly, high turnover and costs to hold short positions, especially in small-cap stocks, result in high transaction costs. We restrict our investment universe to large-capitalized stocks included in the Standard and Poor's (S&P) 100 index. Moreover, we implement simple investment strategies that invest long in single stocks and short in the stock index. Such simple and cost-saving momentum strategies generate economically high and statistically significant abnormal returns. These results are robust to various risk-adjustments including the CAPM, the Fama–French (1993) three-factor model, and a conditional version of the Fama and French (1993) three-factor model.

Suggested Citation

  • Manuel Ammann & Marcel Moellenbeck & Markus M Schmid, 2011. "Feasible momentum strategies in the US stock market," Journal of Asset Management, Palgrave Macmillan, vol. 11(6), pages 362-374, February.
    • Handle: RePEc:pal:assmgt:v:11:y:2011:i:6:d:10.1057_jam.2010.22
    DOI: 10.1057/jam.2010.22
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    References listed on IDEAS

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    Cited by:

    1. Zugang Liu & Jia Wang, 2018. "Do Style Momentum Strategies Produce Abnormal Returns: Evidence From Index Investing," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 12(2), pages 63-75.
    2. Krauss, Christopher & Beerstecher, Daniel & Krüger, Tom, 2015. "Feasible earnings momentum in the U.S. stock market: An investor's perspective," FAU Discussion Papers in Economics 12/2015, Friedrich-Alexander University Erlangen-Nuremberg, Institute for Economics.
    3. Friedrich-Carl Franz & Tobias Regele, 2016. "Beating the DAX, MDAX, and SDAX: investment strategies in Germany," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 30(2), pages 161-204, May.
    4. Laura Andreu & Laurens Swinkels & Liam Tjong-A-Tjoe, 2013. "Can exchange traded funds be used to exploit industry and country momentum?," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 27(2), pages 127-148, June.
    5. Bryan Foltice & Thomas Langer, 2015. "Profitable momentum trading strategies for individual investors," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 29(2), pages 85-113, May.
    6. İbrahim Ethem Güney & Abdullah Kazdal & Doruk Küçüksaraç & Muhammed Hasan Yılmaz, 2021. "Exchange Rate Sensitivity of Firm Value: Evidence from Nonfinancial Firms Listed on Borsa Istanbul," Springer Books, in: Burcu Adıgüzel Mercangöz (ed.), Handbook of Research on Emerging Theories, Models, and Applications of Financial Econometrics, edition 1, pages 141-165, Springer.
    7. Martin H. Schmidt, 2017. "Trading strategies based on past returns: evidence from Germany," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 31(2), pages 201-256, May.

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