Momentum Return in the S&P500: The Explanatory Power of Market State and Turnover Rate
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2020-09-11
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en
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This research examines the performance of 16 different momentum strategies in up and down markets using the S&P500, with all the listed companies, over the period 2000-2018. With the use of monthly returns, momentum returns are compared to raw market returns. Overall, 12 out of 16 momentum strategies yield on average a higher return than the market return as tested with a student T-test. However, when controlling for bull and bear markets, momentum strategy only outperformed the market during down markets. Explaining the momentum returns with two different lengths of market states did not explain the returns. The average stock turnover rate did only explain the returns of the winner portfolio, it failed to explain the loser portfolio. The 12 month market volatility did also seem to explain the winner portfolio returns. The excess market factor of Fama-French did explain best the momentum returns compared over all the strategies.
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Faculteit der Managementwetenschappen