Cross-sectional Momentum in the Norwegian Stock Market

Abstract

We document significant ”cross-sectional momentum” profitability in the Norwegian stock market from Q1 1995 to Q2 2022. The past winners portfolio is identified as the main driver of the cross-sectional momentum returns over the full sample. On the other hand, the past loser portfolio provides a negative return contribution on average on the corresponding sample. Further, we investigate the performance of cross-sectional momentum strategies during three volatile market events. We find that the majority of the strategy returns generated through each of the tested sub-samples is attributable to the past winners portfolio. However, the past losers portfolio consistently yields a strong hedge against the most abrupt market declines. On the flip side, the past loser portfolio accounts for the majority of losses in the wake of each crisis due to its excessive loadings on the market compared to the past winners portfolio. The relapse of the strategy returns is however not considerable enough to be categorised as a ”momentum crash”.