Momentum i aktieafkastet i Danmark

Palle ├śrtoft Pedersen

Student thesis: Master thesis


This thesis investigates the profitability of momentum strategies on the Danish stock market over the 1989 to 2005 period. A momentum strategy is an investment strategy which buys winners (i.e., stocks with high past returns) and sells losers (i.e., stocks with low past returns). Stocks are classified as winners and losers based on their return over the past 3 to 12 months. The holding period is likewise 3 to 12 months. Several different versions of momentum strategies are tested. The average returns of almost all of the versions of the momentum strategies are positive and highly statistical significant. Thus a strong momentum effect exists in the Danish stock market over the period investi-gated. The size of the average returns is comparable to what has been found in previous stu-dies of the US and European stock markets although the average returns for the Danish stock market are higher. Systematic risk measured by beta is found not to be able to explain momentum. The same conclusion is found when measuring systematic risk by size (defined as the market value of a stock) and when measuring risk as total risk (i.e., standard deviation of the return of the mo-mentum strategy). These results are similar to the results in previous studies of stock markets in other countries. Momentum strategies based on the return of industries are constructed in a fashion similar to the momentum strategies based on the return of individual stocks. Different versions of the industry momentum strategies are tested and a strong industry momentum effect is thus shown to exist in the Danish stock market. When comparing with previous studies the results suggest that the industry momentum effect is significantly stronger in the Danish stock market as compared with the US stock market. The findings of this thesis intuitively seem to suggest that industry momentum may partially explain individual stock momentum. Different alternative explanations of momentum are discussed. Data mining is rejected as an explanation of momentum. Trading costs do not appear to be a likely explanation of momen-tum. Behavioral finance is seen as promising but it is thought to be too early to say whether behavioral finance will provide a complete explanation of momentum. The persistence of the momentum effect in the Danish stock market is considered to be likely but a definitive answer to the question of persistence cannot be given as long as a theoretical explanation of the momentum effect has not been found.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
Publication date2010
Number of pages193