Comparative Study of Factor-Based Strategies in the Nordic Countries

Abstract

This thesis examines whether an investor could generate net returns above the Morgan Stanley Country Index by applying momentum and value strategies in the Nordic countries between 1990 and 2019. We first investigate the strategies on individual stocks, then on a sector level, to evaluate whether profits can be attributed to sector exposure. We find the momentum anomaly to be present on an individual stock basis in Norway and Sweden, whereas Denmark and Finland appear to be highly sector dependent. Book-to-market does not generate any net returns above the MSCI indices in any country, and cash flow-to-market works well on an individual stock basis in Norway and Sweden and likewise on sector level in Denmark. Value, in general, outperforms momentum in bear markets, while momentum outperforms value in bull markets. Moreover, the best risk-adjusted returns are achieved by diversifying investments across all four countries.