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Momentum and Turnover: Evidence from the German Stock Market

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  • Markus Glaser
  • Martin Weber
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    Abstract

    This paper analyzes the relation between momentum strategies (strategies that buy stocks with high returns over the previous three to twelve months and sell stocks with low returns over the same period) and turnover (number of shares traded divided by the number of shares outstanding) for the German stock market. Our main finding is that momentum strategies are more profitable among high turnover stocks. In contrast to U.S. evidence, this result is mainly driven by winners: high-turnover winners have higher returns than low-turnover winners. We present various robustness checks, long horizon results, evidence on seasonality, and control for size-, book-to-market-, and industry-effects. We argue that our results are useful to empirically evaluate competing explanations for the momentum effect.

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    Bibliographic Info

    Article provided by LMU Munich School of Management in its journal Schmalenbach Business Review.

    Volume (Year): 55 (2003)
    Issue (Month): 2 (April)
    Pages: 108-135

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    Handle: RePEc:sbr:abstra:v:55:y:2003:i:2:p:108-135

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    Related research

    Keywords: Asset Pricing; Momentum; Momentum Strategies; Return Predictability; Turnover; Trading Volume.;

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    Cited by:
    1. Alexander Franck & Andreas Walter & Johannes Witt, 2013. "Momentum strategies of German mutual funds," Financial Markets and Portfolio Management, Springer, vol. 27(3), pages 307-332, September.
    2. Luis Muga & Rafael SantamarĂ­a, 2009. "Momentum, market states and investor behavior," Empirical Economics, Springer, vol. 37(1), pages 105-130, September.
    3. Glaser, Markus & Langer, Thomas & Weber, Martin, 2003. "On the Trend Recognition and Forecasting Ability of Professional Traders," CEPR Discussion Papers 3904, C.E.P.R. Discussion Papers.
    4. Swanson, Peggy E. & Lin, Anchor Y., 2005. "Trading behavior and investment performance of U.S. investors in global equity markets," Journal of Multinational Financial Management, Elsevier, vol. 15(2), pages 99-115, April.

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