Momentum and the market : quantitative research on a momentum-based stock selection strategy on the Danish large-cap market

It is the foremost goal of any investor to get a positive return on his investments. Milton Friedman stated that a company only has a responsibility towards its shareholders. If that is indeed the case than the goal of an investor should naturally be to find an investment that makes good on that responsibility. It is in the finding of an investment where good investment strategies come in. Price momentum is defined as the continuation of stock price movements. Momentum strategies are labelled as such because they aim to exploit this continuation of stock price movements to make a positive return. In 1993, Jegadeesh and Titman published their theory on relative strength. This theory built on the foundation laid by Robert Levy all the way back in 1967. The theory is simple. Past winners will remain winners, and past losers will remain losers. Since the publication of this theory many economists and finance professionals have tried to test its merit, both as academic research on historical data and simply as using it as an investment strategy. Arguments have been made, both for and against, the presence of momentum in markets as well as for why it is present or is not present. Wesley R. Gray and Jack R. Vogel published their book, Quantitative Momentum, in 2016 and in it they detail their momentum-based investment strategy. The aim of this thesis is to apply that momentum-based strategy on historical data from the Danish large-cap stock market. The results show that there is momentum present in the Danish large-cap market, although no attempt is made to explain the presence of this momentum. The momentum-based strategy by Gray and Vogel can be shown to handily beat the OMXC25 market index, which is the Danish large-cap market. In complementary research the momentum-based strategy is shown to have a 97%-win rate against a portfolio made from stocks chosen at random a thousand times over.

Author dc:creator

• Sverrir Ingi Óskarsson 1982-

Contributors dc:contributor

• Háskólinn á Bifröst

• Lokaritgerðir
• Viðskiptafræði
• Hlutabréfamarkaðir
• Fjárfestingar
• Fjárfestar

Language dc:language.iso

en

Handle dc:identifier.uri

http://hdl.handle.net/1946/40546

OAI identifier oai:identifier

oai:skemman.is:1946/40546