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- OpenAccess
Profitability of Momentum Strategies in Emerging Markets: Evidence from Nairobi Stock Exchange
並列摘要
This paper tests the profitability of momentum strategies in Kenya, an emerging market for the period 1995 to 2007. Both relative strength strategies (RSS) and (weighted relative strength strategies (WRSS) are employed to implement momentum-based trading strategies. Analysis revealed that Nairobi Stock Exchange (NSE) exhibit medium term return continuation over the entire sample period and the sub-periods. We used RSS results to evaluate the influence of transaction costs, calendar effects, risk factors and other reported momentum characteristics on momentum profitability. We employ WRSS results to discriminate between the two diametrically opposed causes for the profitability of momentum strategies: behavioral factors (time-series continuation in the firm-specific component of returns), and risk factors (cross-sectional variation in expected returns and systematic risks of individual securities). Our results show that, consistent with the evidence elsewhere, momentum is an anomaly; the evidence is consistent with momentum being driven by continuation in the idiosyncratic component of individual-security, rather than by cross-sectional differences in expected return and risks.
延伸閱讀
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