Value and Momentum Investing: Discovering Anomalies in the Danish Equity Market

Martin Roland Knudsen

Student thesis: Master thesis


Through recent years value and momentum investing are investment approaches increasingly employed by institutions and individual investors. This was to be expected as academic studies have found such strategies capable of outperforming traditional benchmarks. However, most of these studies focus on the stocks traded in United States and other major economies, while only limited research exists on stocks traded in Denmark. The thesis focuses on stocks traded in Denmark, and strives to extend current research by providing evidence on performance of value and momentum investing in Denmark. A vast amount of academic studies exists on either value or momentum investing whereas only a limited number of studies emphasize the combination of the two approaches. The thesis examines the historical performance of value and momentum per se, however, in particular how these approaches ideally complement each other in a combined strategy. The empirical analysis of momentum and value investing is inspired by the approaches of Jegadeesh and Titman (1993) and Bird and Whitaker (2004). The theories of behavioural finance are applied to understand the herd behaviour behind momentum and value premiums. The thesis finds that book-to-market ratios in combination with price momentum are able to identify stocks on the Danish equity market that over the past 17 years tend to outperform the market. These stocks are characterized as value stocks with recent price momentum, and preferred to hold for the investor. In addition, stocks characterized as growth stocks without price momentum tend to underperform, and the investor can short these to finance his investment strategy.

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
Publication date2017
Number of pages88
SupervisorsOle Risager