THE MOMENTUM EFFECT: ANOMALY OR ILLUSION
Abstract
This paper tests the effectiveness of the momentum strategy for different time horizons between April 2013 and March 2020 and its sources in the Tunisian stock market. The findings display that, employing the methodology of Jegadeesh and Titman (1993), momentum strategy for all time horizons are positive and statistically significant. In the explanation section of the momentum effect, it is found that the momentum is not an illustration of the January effect and that both models (Capital Asset Pricing Model and the model of Fama and French (1993)) are unable to fully capture the profit of momentum strategy. However, we find that trading costs in the form of quoted spread eliminate the statistical significance of the momentum return. Therefore, an investor can’t make a profit by exploiting the momentum strategy in the Tunisian context.
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Copyright (c) 2020 Olfa Chaouachi, Fatma Wyème Ben Mrad Douagi
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