Feasible Momentum Strategies in the US Stock Market

23 Pages Posted: 21 Oct 2010 Last revised: 29 May 2013

Manuel Ammann

University of St. Gallen - School of Finance

Marcel Moellenbeck

University of St. Gallen - Swiss Institute of Banking and Finance

Markus M. Schmid

University of St. Gallen - Swiss Institute of Banking and Finance; University of St. Gallen - School of Finance

Date Written: 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.

Keywords: Momentum strategies, Large-cap stocks, Stock market predictability

JEL Classification: G11, G12

Suggested Citation

Ammann, Manuel and Moellenbeck, Marcel and Schmid, Markus M., Feasible Momentum Strategies in the US Stock Market (November 17, 2010). Available at SSRN: https://ssrn.com/abstract=1694700 or http://dx.doi.org/10.2139/ssrn.1694700

Manuel Ammann

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

Marcel Moellenbeck

University of St. Gallen - Swiss Institute of Banking and Finance ( email )

Rosenbergstrasse 52
St. Gallen, CH-9000
Switzerland

Markus M. Schmid (Contact Author)

University of St. Gallen - Swiss Institute of Banking and Finance ( email )

Rosenbergstrasse 52
St. Gallen, 9000
Switzerland

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

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