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Momentum Profits Using Spread Midpoint Returns and Trading Volume on the Nigeria Stock Exchange

Listed author(s):
  • Tov Assogbavi
  • John Dodge
Registered author(s):

    This paper analyses the relationship between short and medium-horizon returns and trading volume to find out whether trading information is important in predicting the price movements of securities on the Nigeria Stock Exchange. Using a variant of Lehmann's (1990) contrarian trading strategy, wejind strong evidence o/"a relationship between trading activity and subsequent autocovariances in monthly returns. Contrary to Conrad, Hameed, and Niden (1994) who find that high-transactions securities experience price reversals on NASDAQ, our data show a price continuation on the Nigeria Stock Exchange. The main conclusion of this paper is that a momentum portfolio strategy that invests in medium-horizon Winners and sells past Losers gains approximately 2 percent per month. This result is consistent with Rouwenhorst (1998) who found that, on the average, an internationally diversified relative strength portfolio earns approximately 1 percent. Overall, information on trading activity appears to be an important predictor of the returns of individual securities on the Nigeria Stock Exchange.

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    Article provided by African Finance and Economic Association in its journal Journal of African Development.

    Volume (Year): 5 (2002)
    Issue (Month): 1 ()
    Pages: 16-35

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    Handle: RePEc:afe:journl:v:5:y:2002:i:1:p:16-35
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