Return-Based Investment Strategies In The New Zealand Stock Market: Momentum Wins
The purpose of this paper is to examine the profitability of return-based investment strategies in the New Zealand stock market; 16 such strategies are examined for the period from January 1995 to December 2004. The paper shows that, at the end of each month of the sample period, every security is ranked in ascending order using their past J-month formation period cumulative return (J = 3, 6, 9 and 12). Then these securities are allocated to three groups; group 1 represents the loser portfolio, while group 3 represents the winner portfolio. Finally, equally weighted average returns of winner and loser portfolios are calculated over the next K-month holding period (K = 3, 6, 9, and 12).