The Momentum Anomaly: Can It Still Outperform the Market?

Abstract

This thesis adds to the already broad literature investigating simple trend-following strategies. We study the ability of a time series momentum strategy to generate abnormal returns following the methodology of Moskowitz et al. (2012). We find evidence of the strategy generating statistically significant returns, even though we further find overwhelming evidence for lower return predictability in the period of 2009-2021. This suggests a diminishing effect of the momentum anomaly. We also find that adding drawdown control as a risk management tool extensively enhances the strategy’s performance. This thesis is a part of the MSc programme at BI Norwegian Business School. The school takes no responsibility for the methods used, results found, or conclusions drawn.