Skapar momentuminvestering överavkastning? En studie gjord på den indiska och australiska marknaden.

Abstract

Title Does Momentuminvesting create abnormal profits? A study made on the Indian and the Australian stock market. Authors Erik Johansson Kristofer Ekman Sinclair Victor Höglund Supervisor Ted Lindblom, Economic doctor at the department of Industrial and Financial Management at the University of Economics and Law in Gothenburg Purpose The main purpose of this paper is to evaluate if momentuminvesting creates abnormal profits on the Indian and Australian stock markets. The study will also provide useful material for the debate regarding efficient markets. If the paper finds momentuminvesting successful, it will provide strong evidence of market inefficiency. The secondary purpose is to examine factors that drive or explain different results on markets in different stages. Methodology The momentum strategy can be applied on a short position in observed losers, a long position in observed winners or a combination of the two. The study will be based on portfolios containing stock that have been analyzed from one year back in time and then held for a period of three months. Overlapping portfolios will then be created every third months. This procedure is made on both the Indian and Australian market. Altogether the paper will contain and analyze the result of 57 different portfolios. Conclusions The paper concludes that momentuminvesting is an effective method to use in order to gain abnormal returns. It is especially profitable when applied on newly developed stock markets due to the greater volatility and market inefficiency. The effects can however be identified on developed markets as well but the momentum is profited from by far more investors creating smaller results for each investor. The effect is generally also best when portfolios consist of only winners. The results also show that risk increases if portfolios only consist of losers.