Unveiling the Relevancy of Momentum Strategies- A study on the Swedish Equity Market

University essay from Göteborgs universitet/Graduate School

Author: Oscar Bodin; Pär Börjeson; [2023-06-29]

Keywords: ;

Abstract: This study investigates the performance of the traditional return momentum strategy and the residual momentum strategy on the Swedish market over the period 1990 to 2022. The residual momentum strategy show higher risk-adjusted return compared to the traditional return momentum strategy in equally weighted portfolios, and the opposite in value-weighted portfolios. A key finding is that the residual momentum strategies experience notably lower volatility overall. In addition, we find the momentum strategies to be size-dependent and perform significantly better in the medium-sized companies. In the end, it is still difficult to say whether strategies like this will generate positive return in real life since momentum investing is plagued by high turnover, which implies high transaction costs.

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