Can Momentum Portfolios Earn More in the Karachi Stock Exchange?

Syed Hamid Ali Shah, Attaullah Shah

Abstract


In this study, we attempt to show empirical evidence of momentum profits in Karachi Stock Exchange (KSE) using monthly stocks returns data of 609 stocks over the period June 2004 to March 2014. Using Jegadeesh and Titman (1993) methodology, we find that investors can earn positive returns by holding a zero-investment momentum portfolio i.e. buying past winners stocks and selling past losers stocks. These results are robust to excluding small stocks (share price< PKR 5) as well as to using different sample periods. Further research in this area might consider factors such as risk, size, liquidity, book-to-market value, transaction costs, and trading volume to see which of these factors can explain momentum profits in KSE.


Keywords


Momentum Returns; Pakistan; Winners and Losers; Mean Reversion

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DOI: http://dx.doi.org/10.22555/pbr.v17i1.20

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