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Momentum returns and size of winner and loser portfolios

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  • Antonios Siganos

Abstract

Previous studies in the field of the momentum effect have defined winner and loser portfolios only by using deciles, quintiles or triciles. This article overcomes this limitation by investigating the magnitude of momentum gains for various sizes of winner and loser portfolios. It is found that beyond the first few extreme winners and losers, there is a continuous decline of momentum gains for larger number of shares portfolios. Maximum momentum returns, at the magnitude of 2.09% per month, emerge when only the 40 top and bottom performing shares are employed. This study also shows that for large portfolios, it is not essential for investors to sell the loser portfolio short, since its influence on momentum returns is insignificant. Overall, this article supports the existence of the momentum effect and even shows that investors can take a better advantage of the continuation in share prices than previously reported.

Suggested Citation

  • Antonios Siganos, 2007. "Momentum returns and size of winner and loser portfolios," Applied Financial Economics, Taylor & Francis Journals, vol. 17(9), pages 701-708.
    • Handle: RePEc:taf:apfiec:v:17:y:2007:i:9:p:701-708
    DOI: 10.1080/09603100600722193
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    Cited by:

    1. Syed Riaz Mahmood Ali, 2022. "Do momentum and reversal matter in the Singapore stock market?," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 29(6), pages 1692-1708, November.
    2. Bryan Foltice & Thomas Langer, 2015. "Profitable momentum trading strategies for individual investors," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 29(2), pages 85-113, May.
    3. Kartick Gupta & Stuart Locke & Frank Scrimgeour, 2013. "Profitability of momentum returns under alternative approaches," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 9(3), pages 219-246, June.

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