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Enhancement of value portfolio performance using momentum and the long-short strategy: The Finnish evidence

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  • Timo H Leivo

    (School of Business, Lappeenranta University of Technology)

  • Eero J Pätäri

Abstract

This article examines the added value of combining price momentum with various value strategies in the Finnish stock market during the period 1993–2008. The results show that taking into account the price momentum of value stocks enhances portfolio performance. Among the best-performing portfolios, the performance improvement resulting from the inclusion of a momentum indicator is the greatest for value portfolios that are formed on the basis of three-composite value measures. The risk-adjusted performance of the best value winner portfolios can be enhanced further by following the 130/30 long-short strategy. The best long-short portfolios significantly outperform the corresponding long-only value winner portfolios and more than double the average return of the stock market coupled with the volatility decrease.

Suggested Citation

  • Timo H Leivo & Eero J Pätäri, 2011. "Enhancement of value portfolio performance using momentum and the long-short strategy: The Finnish evidence," Journal of Asset Management, Palgrave Macmillan, vol. 11(6), pages 401-416, February.
    • Handle: RePEc:pal:assmgt:v:11:y:2011:i:6:d:10.1057_jam.2009.38
    DOI: 10.1057/jam.2009.38
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    Cited by:

    1. Eero Pätäri & Timo Leivo, 2017. "A Closer Look At Value Premium: Literature Review And Synthesis," Journal of Economic Surveys, Wiley Blackwell, vol. 31(1), pages 79-168, February.
    2. Eero J. Pätäri & Timo H. Leivo & Janne Hulkkonen & J. V. Samuli Honkapuro, 2018. "Enhancement of value investing strategies based on financial statement variables: the German evidence," Review of Quantitative Finance and Accounting, Springer, vol. 51(3), pages 813-845, October.
    3. Timo H. Leivo, 2012. "Combining value and momentum indicators in varying stock market conditions," Review of Accounting and Finance, Emerald Group Publishing Limited, vol. 11(4), pages 400-447, October.

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