Momentum Trading for the Private Investor
HANDBOOK OF TRADING, G. Gregoriou, ed., McGraw-Hill Publishing, 2010
Posted: 2 Feb 2010
Date Written: February 1, 2010
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: Suggested Citation