Beruflich Dokumente
Kultur Dokumente
Stock Return
Research Question
The relation between beta and cross
sectional return is flat; can the variation
in average return be explained by
variables such as size, market value,
leverage, earning-price ratio etc?
Methodology Cont
Form 10 size based portfolio and rank them,
Due to -0,98% correlation between size and
subdivide each group into 10 subgroups
based on their , unrelated to the size,
Calculate 12 month return using monthly
returns on each portfolio and find the average
return for full period,
Calculate betas via time series regression
over the whole period (330 months),
Run a cross sectional regression.
Research Question
Is momentum strategy, which
involves buying past winners selling
the past losers a valid strategy?
Can profitable trading strategies be
constructed using momentum
stocks??
Methodology Cont
Seasonal Effect??
It appears that only in the month of
January momentum strategy losses its
magnitude (almost 7% decreases in
average return) but generates positive
abnormal return in the rest of the year.
Results indicate that every year in April
maybe due to the fact that companies
transfer money to pension funds the
strategy consistently generates around
3% average monthly return.
Thank you!