Are Momentum Profits Robust to Trading Costs?  

Oleh:

Korajczyk, Robert A. ; Sadka, Ronnie

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: The Journal of Finance (EBSCO) vol. 59 no. 3 (Jun. 2004), page 1039-1082.
Topik: MARKETS; securities markets; securities trading; rates of return; investment policy; costs; studies; mathematical models
Fulltext: p 1039.pdf (343.99KB)

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Perpustakaan Pusat (Semanggi) Nomor Panggil: JJ88 Non-tandon: 1 (dapat dipinjam: 0) Tandon: tidak ada

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Isi artikel

We test whether momentum strategies remain profitable after considering market frictions induced by trading. Intraday data are used to estimate alternative measures of proportional and non - proportional (price impact) trading costs. The price impact models imply that abnormal returns to portfolio strategies decline with portfolio size. We calculate break - even fund sizes that lead to zero abnormal returns. In addition to equal - and value - weighted momentum strategies, we derive a liquidity - weighted strategy designed to reduce the cost of trades. Equal - weighted strategies perform the best before trading costs and the worst after trading costs. Liquidity - weighted and hybrid liquidity / value - weighted strategies have the largest break-even fund sizes : $5 billion or more (relative to December 1999 market capitalization) may be invested in these momentum strategies before the apparent profit opportunities vanish.

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