Combining Value and Momentum: Evidence from the Nordic Equity Market

26 Pages Posted: 19 Aug 2018

See all articles by Klaus Grobys

Klaus Grobys

University of Vaasa; University of Jyväskyla

Topi Huhta-Halkola

University of Vaasa - Department of Accounting and Finance

Date Written: August 6, 2018

Abstract

This is the first paper that explores Fisher, Shah and Titman’s (2016) average ranking approach for the value and momentum strategy in the Nordic equity market offering an exceptional experimental environment. Our results indicate that in the Nordic stock markets, the value anomaly offered excess returns in the 1993 to 2017 sample period only when small stocks were a part of the portfolio, whereas the momentum effect is strong and significant, irrespective of size. Interestingly, our findings also indicate that the negative correlation between value and momentum (Asness, Moskowitz and Pedersen, 2013) seems to be driven by growth stocks: Winner stocks that are value stocks generated 1.66% per month on average, whereas winner stocks that are growth stocks exhibit virtually the same average payoff. On the other hand, the spread between value and growth stocks that are loser stocks is on average 0.97% per month.

Keywords: nordic stock markets, value, momentum, average ranking method, negative correlation

JEL Classification: G12, G14

Suggested Citation

Grobys, Klaus and Huhta-Halkola, Topi, Combining Value and Momentum: Evidence from the Nordic Equity Market (August 6, 2018). Available at SSRN: https://ssrn.com/abstract=3226899 or http://dx.doi.org/10.2139/ssrn.3226899

Klaus Grobys (Contact Author)

University of Vaasa ( email )

P.O. Box 700
Wolffintie 34
FIN-65101 Vaasa
Finland

University of Jyväskyla ( email )

Jyväskyla
Finland

Topi Huhta-Halkola

University of Vaasa - Department of Accounting and Finance

P.O. Box 700
FIN-65101 Vaasa, FI-65101
Finland

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