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Alpha analysis - A momentum and performance metrics study of the efficient market hypothesis

Nilsson, Andreas LU and Lindberg, Mikael LU (2012) NEKM01 20111
Department of Economics
Abstract
In this study the efficiency of the Nordic stock markets are tested. The evaluation period is 16 years, between 1995 and 2010. Monthly data on stock returns, D/Y, P/C, P/E, PTBV and EV/EBITDA are used to create six different single sorted portfolios. The portfolio evaluation periods and holding periods are set to six months. Our findings indicate that all of our single sorted portfolios could generate abnormal returns. These results are compared to that of the double sorted portfolios in order to investigate the profitability of different investment strategies. In the double sorted portfolios the momentum strategy is combined with each of the five performance metrics. In these regressions, the results indicate that the double sorted... (More)
In this study the efficiency of the Nordic stock markets are tested. The evaluation period is 16 years, between 1995 and 2010. Monthly data on stock returns, D/Y, P/C, P/E, PTBV and EV/EBITDA are used to create six different single sorted portfolios. The portfolio evaluation periods and holding periods are set to six months. Our findings indicate that all of our single sorted portfolios could generate abnormal returns. These results are compared to that of the double sorted portfolios in order to investigate the profitability of different investment strategies. In the double sorted portfolios the momentum strategy is combined with each of the five performance metrics. In these regressions, the results indicate that the double sorted portfolios generate larger abnormal returns compared to that of the single sorted portfolios. These findings could have many causes, but the nature of the results indicates that the value based strategies aggravate the momentum effect, leading us to believe that the results could be emulated using a more extreme selection process based on the momentum effect. (Less)
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author
Nilsson, Andreas LU and Lindberg, Mikael LU
supervisor
organization
course
NEKM01 20111
year
type
H1 - Master's Degree (One Year)
subject
keywords
Momentum, Value strategies, Performance metrics, Abnormal returns, Efficient market hypothesis
language
English
id
2302460
date added to LUP
2012-02-13 10:20:52
date last changed
2012-02-13 10:20:52
@misc{2302460,
  abstract     = {In this study the efficiency of the Nordic stock markets are tested. The evaluation period is 16 years, between 1995 and 2010. Monthly data on stock returns, D/Y, P/C, P/E, PTBV and EV/EBITDA are used to create six different single sorted portfolios. The portfolio evaluation periods and  holding periods are set to six months. Our findings indicate that all of our single sorted portfolios could generate abnormal returns. These results are compared to that of the double sorted portfolios in order to investigate the profitability of different investment strategies. In the double sorted portfolios the momentum strategy is combined with each of the five performance metrics. In these regressions, the results indicate that the double sorted portfolios generate larger abnormal returns compared to that of the single sorted portfolios. These findings could have many causes, but the nature of the results indicates that the value based strategies aggravate the momentum effect, leading us to believe that the results could be emulated using a more extreme selection process based on the momentum effect.},
  author       = {Nilsson, Andreas and Lindberg, Mikael},
  keyword      = {Momentum,Value strategies,Performance metrics,Abnormal returns,Efficient market hypothesis},
  language     = {eng},
  note         = {Student Paper},
  title        = {Alpha analysis - A momentum and performance metrics study of the efficient market hypothesis},
  year         = {2012},
}