Momentum Trading for the Private Investor

HANDBOOK OF TRADING, G. Gregoriou, ed., McGraw-Hill Publishing, 2010

Posted: 2 Feb 2010

See all articles by Alexander Molchanov

Alexander Molchanov

Massey University

Philip A. Stork

Vrije Universiteit Amsterdam, School of Business and Economics; Tinbergen Institute

Date Written: February 1, 2010

Abstract

The chapter explores the potential profitability of a momentum strategy for a private investor. Such a strategy is based on price continuation and requires buying stocks that have performed well in the past while short selling underperforming stocks. In order to replicate a trading strategy readily attainable by individual investors, we only select constituents of major worldwide indices. Consistent with prior work, we document strong momentum in shares around the world. However, we also find that when trading costs are accounted for, momentum profits disappear in some markets. Nevertheless, in Australia and Canada momentum profits remain positive and significant.

Keywords: Momentum, stock returns

JEL Classification: G11, G14

Suggested Citation

Molchanov, Alexander and Stork, Philip A., Momentum Trading for the Private Investor (February 1, 2010). HANDBOOK OF TRADING, G. Gregoriou, ed., McGraw-Hill Publishing, 2010. Available at SSRN: https://ssrn.com/abstract=1546214

Alexander Molchanov (Contact Author)

Massey University ( email )

Auckland
New Zealand

Philip A. Stork

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

Tinbergen Institute ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

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