Can small investors exploit the momentum effect?

Siganos, A. (2010) Can small investors exploit the momentum effect? Financial Markets and Portfolio Management, 24(2), pp. 171-192. (doi:10.1007/s11408-009-0120-3)

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Abstract

This study uses UK data and investigates whether small investors can exploit the continuation effect in share prices. Individual traders are not in a financial position to buy and sell short hundreds of firms, as suggested by existing academic research, and thus this study uses extreme performance companies to implement the strategy. We find that strong momentum gains appear when extreme winners and losers are employed. These returns remain strong even after considering the transaction costs of implementing such strategies, including commissions, stamp duty, selling-short costs, and bid-ask spread. Overall, we show that a relatively large number of small investors can enjoy momentum gains, providing some evidence against stock market efficiency.

Item Type:Articles
Additional Information:The original publication is available at www.springerlink.com
Keywords:Stock market efficiency, momentum effect, transaction cost
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:Siganos, Dr Antonios
Authors: Siganos, A.
Subjects:H Social Sciences > HG Finance
College/School:College of Social Sciences > Adam Smith Business School > Accounting and Finance
Journal Name:Financial Markets and Portfolio Management
Journal Abbr.:FMPM
Publisher:Springer Boston
ISSN:1555-4961
ISSN (Online):1555-497X
Published Online:22 December 2009
Copyright Holders:Copyright © 2010 Springer
First Published:First published in Financial Markets and Portfolio Management 24(2):171-192
Publisher Policy:Reproduced in accordance with the copyright policy of the publisher

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