Buradasınız

Anasayfa » Content

MOMENTUM STRATEGY AND BOMBAY STOCK EXCHANGE

Journal Name:

  • Sovremennaâ Ekonomika : Problemy, Tendencii, Perspektivy

Publication Year:

  • 2012

Key Words:

Author NameFaculty of Author
Abstract (2. Language): 
Short term momentum effect claims that recent past winners tend to outperform the market whereas recent past losers tend to underperforms the market. Therefore by definition it challenges the efficient market hypothesis, which is of the view that future returns cannot be predicted by using past returns. This study examines whether short term momentum effect challenges the efficient market hypothesis or not. Momentum effect has been found in almost all the stock exchanges in the world and documented in the financial literature by many well-known scholars. For this purpose, Bombay Stock Exchange (BSE) has been chosen and stock prices of BSE 100 index have been downloaded for the period starting from 24 June, 2006 and ending on 24 June, 2011 to perform momentum calculations. BSE has been selected because of its rapidly growing nature. Many leading articles have mentioned Bombay Stock Exchange as one of the fastest emerging capital stock market in the world. Short term momentum anomaly has been found in Bombay Stock Exchange. Price momentum strategy gives abnormal returns, if implemented in BSE. Average monthly return from BSE is 12.05% which is higher than many leading stock markets of the world for instance NYSE, AMEX, and LSE etc. It is also noticed that winners are outperforming the losers. The above findings are in line with the findings of existing literature. Trading volume based momentum strategies only work when high trading volume and low trading volume based strategies will be used in combination with each other. The notion that “BSE is an emerging market” has also been tested. Returns of momentum strategy from Bombay Stock Exchange and Karachi Stock Exchange have been compared and found that BSE gives more returns than KSE. It has been confirmed from this finding that BSE is the emerging stock market in the region.
Bookmark/Search this post with
FULL TEXT (PDF): 
PDF icon arastirmax-momentum-strategy-and-bombay-stock-exchange.pdf
  • 7
1-21
  • English

JEL Codes:

REFERENCES

References: 

1. Barberis, N., Shleifer, A. and Vishny, R. (1998). A model of investor sentiment.
Journal of Financial Economics, 116:1, 1-53.
2. Barth, J., Li, T., and Prabgavivadhana, A. (2011). Greece's "Unpleasant
Arithmetic", containing the Threat to the Global Economy. Global Economy Journal,
11, 1-13.
3. Beny, L. (1999). A comparative empirical investigation of agency and market
theories of insider trading. Working paper, Harvard Law School.
4. Bulkley, G. and Nawosah, V. (2005). Can the Cross-Section Dispersion of
Expected Stock Returns Explain Momentum? Working Paper. University of Exeter.
5. Daniel, K., Hirshleifer, D. and Subrahmanyam, A. (1998). Investor psychology
andsecurity market under- and overreaction. Journal of Finance, 53, 1839-1886.
6. Fama, E.F. (1991). Efficient capital markets: 11. Journal of Finance, 46, 1575-
1617.
7. Hirshleifer, D. (2001). Overconfidence, arbitrage, and equilibrium asset pricing.
Journal of Finance, 56, 921-966.
7. Griffin, J. M., Ji, X.. and Spencer., J.M. (2002). Momentum investing and business
cycle risk: Evidence from pole to pole. Working paper, Arizona State University.
9. Jegadeesh, N. and Titman, S. (1991). Returns of Buying Winners and Selling
Losers: Implications for Stock Market Efficiency. Journal of Finance, 48, 65-91.
10. Jegadeesh, N. and Titman, S. (1995). Short-horizon return reversals and the bidask
spread. Journal of Financial Intermediation, 4, 116-132.
11. La Porta, R., Vishny, R., Lopez-de-Silanes, F. and Shleifer, A. (1998). Law and
Finance, Journal of Political Economy, 106, 1113-55.
12. Polak, P., Robertson, D. and Lind, M. (2011). The New Role of the Corporate
Treasurer: Emerging Trends in Response to the Financial Crisis. International
Research Journal of Finance and Economics, 78, 48-69.
13. Rouwenhorst, K. G. (1998). International momentum strategies. Journal of
Finance, 53, 267–284.
14. Rouwenhorst, K. G. (1999). Local return factors and turnover in emerging
markets. Journal of Finance, 54, 1439–1464.
15. Schiereck, D.., De Bondt, W. and Weber, M. (1999). Contrarian and momentum
strategies in Germany. Financial Analysts Journal. 55, 104–116.
16. Swinkels, L. (2002). International industry momentum. Journal of Asset
Management, 3, 124-141.
17. Wang, J. (1994). A model of competitive stock trading volume. Journal of
Political Economy, 102, 127-168.

Thank you for copying data from http://www.arastirmax.com