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Momentum and industry-dependence: An analysis of the Swiss stock market

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Abstract

Various studies have shown that future stock returns are predictable based on past returns in many international security markets. Developing strategies to benefit from these autocorrelations of security returns and finding reasons for the abnormal positive returns resulting from trading strategies are major objectives of investment research. Following Jegadeesh and Titman, we analyze the profitability of momentum strategies in the Swiss stock market over the period from December 1979 until February 2009. Controlling for market returns and for transaction costs, we find that investors using momentum strategies could have indeed generated superior returns during that time period. This applies for several combinations of ranking and holding periods. In addition, we analyze for the first time whether the returns of momentum strategies involving Swiss stocks are industry-dependent. Our findings suggest that momentum in the Swiss stock market is clearly driven by high-technology stocks. The financial sector, in contrast, performs worst over that period of time.

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Notes

  1. Since August 2008 the name of the Swiss stock exchange is SIX Swiss Exchange. Before the name was SWX Swiss Exchange.

  2. For an overview of the components of trading costs, see Korajczyk and Sadka (2004).

  3. The High-Tech sector encompasses Datastream's Aero Space & Defense, Alternative Energy, Pharmaceuticals & Biotech, Software & Computer Services, and Technology Hardware & Equipment sectors. The Services sector is comprised of the Electricity Fixed Line, Telecommunications, Food & Drug Retailers, General Retailers, Media Mobile Telecommunication, Support Services, and Travel and Leisure sectors. The Financials sector comprises the Banks, Financial Services, Life Insurance and Non-Life Insurance sectors. The Production sector encompasses the Automobiles & Parts, Beverages, Chemicals, Construction Materials, Electronic & Electrical Equipment, Food Producers, Foresting & Paper, Gas Water Multiutilities, General Industrials, Health Care Equipment & Services, Household Goods, Industrial Engineering, Industrial Metals & Mining, Leisure Goods, Mining, Oil & Gas, Oil Equipment, Personal Goods and Tabacco sectors.

  4. The distribution of industries and companies is as follows: high-technology 59 of 469, financials 118 of 469, services 90 of 469, production 202 of 469.

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Authors and Affiliations

  1. Department of Finance, University of Bamberg, 96045, Bamberg, Germany

    Tim Herberger & Daniel Kohlert

Authors
  1. Tim Herberger
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  2. Daniel Kohlert
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  3. Andreas Oehler
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Correspondence to Tim Herberger or Daniel Kohlert.

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3holds the Chair of Finance at the University of Bamberg. He received his PhD at the University of Mannheim and his Habilitation degree at University of Hagen. He has published widely, in particular, in the area of credit risk management, banking, behavioral and empirical finance, as well as investor protection, and is member of various expert committees such as the Scientific Advisory Board for Consumer, Food, and Nutrition Policies to the Federal Ministry of Consumer Protection, Food, and Agriculture, Germany.

†Authors are members of the Department of Management, Business Administration and Economics, University of Bamberg, Bamberg, Germany.

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Herberger, T., Kohlert, D. & Oehler, A. Momentum and industry-dependence: An analysis of the Swiss stock market. J Asset Manag 11, 391–400 (2011). https://doi.org/10.1057/jam.2010.23

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