The Momentum Effect: Evidence from the Swedish stock market

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This thesis investigates the profitability of the momentum strategy in the Swedish stock market. The momentum strategy is an investment strategy where past winners are bought and past losers are sold short. In this paper Swedish stocks are analyzed during the period 1999 – 2007 with the approach first used by Jegadeesh and Titman (1993). The results indicate that momentum investing is profitable on the Swedish market. The main contribution to the profits is derived from investing in winners while the losers in most cases do not contribute at all to total profits. The profits remain after correcting for transaction costs for longer termed strategies while they diminish for the shorter termed ones. Compared to the market index, buying past winners yield an excess return while short selling of losers tend to make index investing more profitable. The analysis also shows that momentum can not be explained by the systematic risk of the individual stocks. The evidence in support of a momentum effect presented in this thesis also implies t...