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Momentum and the FTSE 350

Author

Listed:
  • Mark Ellis

    (Cass Business School, City University)

  • Dylan C Thomas

    (Cass Business School, City University)

Abstract

This study shows that, in the period 1990–2003, zero-cost portfolios comprising companies from the FTSE 350 index exhibited medium-term return momentum. The returns of simple momentum strategies during this volatile period tend to be greater than other studies have suggested, at around 1.4 per cent per month. Return momentum is stronger in those portfolios that have high trading volume during the formation period. Although transaction costs for momentum strategies are markedly higher than previous studies have suggested, momentum returns still exist. There is no evidence to suggest that the momentum returns are generated by holding excess systematic risk. Momentum strategies instituted during or shortly after periods of market stress, however, yield negative returns.

Suggested Citation

  • Mark Ellis & Dylan C Thomas, 2004. "Momentum and the FTSE 350," Journal of Asset Management, Palgrave Macmillan, vol. 5(1), pages 25-36, June.
    • Handle: RePEc:pal:assmgt:v:5:y:2004:i:1:d:10.1057_palgrave.jam.2240125
    DOI: 10.1057/palgrave.jam.2240125
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    Citations

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    Cited by:

    1. Galariotis, Emilios C. & Holmes, Phil & Ma, Xiaodong S., 2007. "Contrarian and momentum profitability revisited: Evidence from the London Stock Exchange 1964-2005," Journal of Multinational Financial Management, Elsevier, vol. 17(5), pages 432-447, December.
    2. Andrew Clare & Svetlana Sapuric & Natasa Todorovic, 2010. "Quantitative or momentum-based multi-style rotation? UK experience," Journal of Asset Management, Palgrave Macmillan, vol. 10(6), pages 370-381, February.
    3. Badreddine, Sina & Galariotis, Emilios C. & Holmes, Phil, 2012. "The relevance of information and trading costs in explaining momentum profits: Evidence from optioned and non-optioned stocks," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(3), pages 589-608.
    4. Antonios Siganos, 2010. "Can small investors exploit the momentum effect?," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 24(2), pages 171-192, June.
    5. Sina Badreddine & Ephraim Clark, 2021. "The asymmetric effects of industry specific volatility in momentum returns," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 6444-6458, October.

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