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Feasible Momentum Strategies in the US Stock MarketManuel AmmannUniversity of St. Gallen - Swiss Institute of Banking and Finance Marcel MoellenbeckUniversity of St. Gallen - Swiss Institute of Banking and Finance Markus M. SchmidUniversity of St. Gallen - Swiss Institute of Banking and Finance November 17, 2010 Abstract: While there is a large literature documenting the profitability of momentum strategies, their implementation is afflicted with many difficulties. Most importantly, high turnover and costs to hold short positions, especially in small-cap stocks, result in high transaction costs. We restrict our investment universe to large-capitalized stocks included in the S&P 100 index. Moreover, we implement simple investment strategies that invest long in single stocks and short in the stock index. Such simple and cost-saving momentum strategies generate economically high and statistically significant abnormal returns. These results are robust to various risk-adjustments including the CAPM, the Fama French (1993) three-factor model, and a conditional version of the Fama and French (1993) three-factor model.
Number of Pages in PDF File: 23 Keywords: Momentum strategies, Large-cap stocks, Stock market predictability JEL Classification: G11, G12 working papers seriesDate posted: October 21, 2010 ; Last revised: November 19, 2010Suggested CitationContact Information
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