Definition And Definition Of Key Terms

The weekly performance of IBM stock presented a contestant growth. One highlight of the falling of stock price in the 6th week in the investment period was when IBM presented the 3rd quarter financial report. The investors weren’t satisfied with the profit report which they expected to be better especially when other IT companies were doing well in the 3rd quarter. One mistake I made was that I didn’t follow closely to the financial report of the company; therefore, I missed the peak of the stock price. From this experience, I learned that financial reports and current news are important indicators of the stock price. By following closely to the current event and analyzing the financial report, investors can maximize the profit and also become more familiar to the market.

The authors jointly examine momentum and value in eight different markets and asset classes. Asness, Moskowitz and Pederson found two main phenomena associated with returns across 8 various markets and asset classes in their research. These findings challenge previous, well-established theories, like the existence of significant premia in value and momentum return strategies across asset classes and global markets. This innovative research includes some new asset classes not previously used, such as government bonds, currencies, and commodities. The authors look to prove the

In February 1995, Adam Bain, investment advisor in the London, Ontario branch of RBC Dominion Securities Inc. (RBC DS), was considering whether or not to implement a price momentum strategy for his clients. Trend and Cycle, DS’s technical research department, had recently circulated a copy of a study which described a simple price momentum model and referred to its “startling results” based on back testing the strategy over a 15 year period. The Trend and Cycle group had long promoted the importance of price momentum and relative strength to potential clients. Bain needs to determine whether the proposed model was “too good to be true” or, if it did not look promising, how he would go about

The following terms are provided with definition to increase the reader’s understanding of this study.

Receivables Turnover: This shows the degree of realization in accounts receivables. Company N has a lower turnover rate, a lower rate implies that receivables are being held longer and the less likely they are to be collected. Also there is an opportunity cost of tying up funds in receivables for a long period of time. Company M is 29 times higher than company N.

In order to analyze the momentum effect of different specifications, stocks were divided into ‘winner’ stocks and ‘loser’ stocks according to their rankings.

by x%, the portfolio changes by x*beta%  market value of the market representation product used for short selling

The main point I received from the source material in this particular case is that investors may tend to follow trends in the stock market. However, due to the representativeness heuristic instances, forecasting a future trend is much more difficult than following a current one. The success of following the current trend is also something to keep in mind because it takes diligence to be able to see what is actually a trend or a slight change in the sequence of events in the stock performance. Based on this information, I believe it is best for an investor to be able to take a step back upon evaluating a stock market trend or stock performance, and really look at what is changing/not changing, as far as the stock prices are concerned. This will be helpful in being able to withstand a loss or in contrary reaping the benefits of a stock purchase gain. The relation between the two sources so far have been that there can be random occurrences in the stock

There is a method of stock trading known as Algorithmic Trading. As the name implies, algorithms are used to make buy and sell orders in the stock market. A subset of Algorithmic Trading, known as High Frequency Trading (HFT), was blamed by the media for the Flash Crash.

The efficient market, as one of the pillars of neoclassical finance, asserts that financial markets are efficient on information. The efficient market hypothesis suggests that there is no trading system based on currently available information that could be expected to generate excess risk-adjusted returns consistently as this information is already reflected in current prices. However, EMH has been the most controversial subject of research in the fields of financial economics during the last 40 years. “Behavioural finance, however, is now seriously challenging this premise by arguing that people are clearly not rational” (Ross, (2002)). Behavioral finance uses facts from psychology and other human sciences in order to

In addition to ordinary Fama-French Three Factor Model, we also want to examine the momentum effect existence on the firm-level returns. The average returns of stock and bond can be explained by the value and momentum factors in North American Companies (Fama et al., 2012).

There have been a number of models in the traditional finance paradigm which have the common assumption that the investors would act rationally and consider all sources of information in their marking or investing decisions. That would also lead to

Individuals engaging in this type of trading strategy are characterized by their attempt to profit from guessing the direction of the market

Key Words: Financial Momentum Effect, Momentum Strategy, Market Efficiency Hypothesis, Fama-French Three Factors Model, Behavioral Finance

The following presents the studies examined on the momentum effect in several markets. The markets have been divided into the United States market, European market, Asian market, and emerging market.