Momentum and Turnover: Evidence from the German Stock Market
Schmalenbach Business Review, Vol. 55, pp. 108-135, 2003
Posted: 6 Jun 2003 Last revised: 18 Apr 2011
Date Written: 2003
This paper analyzes the relation between momentum strategies (strategies that buy stocks with high returns over the previous three to twelve months and sell stocks with low returns over the same period) and turnover (number of shares traded divided by the number of shares outstanding) for the German stock market. Our main finding is that momentum strategies are more profitable among high-turnover stocks. In contrast to U.S. evidence, this result is mainly driven by winners: high-turnover winners have higher returns than low-turnover winners. We present various robustness checks, long-horizon results, evidence on seasonality, and control for size-, book-to-market-, and industry-effects. We argue that our results are useful to empirically evaluate competing explanations for the momentum effect.
Keywords: Asset Pricing, Momentum, Momentum Strategies, Return Predictability, Turnover, Trading Volume
JEL Classification: G10, G11, G12
Suggested Citation: Suggested Citation