Using 52-week momentum approach for forming a superior active portfolio ” A empirical study on Iraqi stock market From January 2016 to November 2023
Applied To the Council of the College of Administration and Economics, Kerbala University, as Partial Fulfillment for the Requirements for Master’s degree in Finance and Banking sciences.
Authored by
Ahmed Falah Hasan Al-Safi
Supervision by
Assi. Prof. Dr. Mohammed Faez Hasan Al-Zauba’ay
Abstract
Using technical analysis methods is considered one of the fundamental pillars for trading in financial markets. These methods vary, and their applications differ among traders. One well-known approach is momentum trading. The momentum strategy has proven successful in financial markets, especially when analyzing stock performance based on the highest price over 52 weeks. Hence, the study aims to provide theoretical knowledge about the concept of momentum strategy, its diversity, and to test the momentum strategy for the highest price over 52 weeks in the Iraqi Stock Exchange. For this purpose, the study poses several questions: Can an outperforming active portfolio be constructed based on momentum strategies for the highest price over 52 weeks in the Iraqi Stock Exchange? Do the results of portfolios differ before and during the COVID-19 pandemic? Is there an impact of transaction costs on the profitability of strategies for the highest price over 52 weeks in the Iraqi Stock Exchange?
To address these questions, the study conducted a detailed analysis of a sample of 31 companies listed on the Iraqi Stock Exchange from January 2016 to November 2023. Using Microsoft Excel 2019 and SPSS v29, stocks were selected to construct momentum portfolios based on the 52-week strategy for the periods before and during the COVID-19 pandemic, considering transaction costs. Performance evaluation ratios for active portfolios were used for comparison with the market reference portfolio. Key findings of the study indicate that momentum portfolios based on the 52-week strategy achieve returns, but statistically insignificant, diminishing with the introduction of transaction costs. There is also a clear difference in the returns of momentum portfolios before the COVID-19 pandemic, where they were higher than during the pandemic. The study offers several recommendations, with a notable one being cautious about using the 52-week strategy due to the high transaction costs within the Iraqi Stock Exchange, as it does not cover the profits.
Keywords: Technical Analysis, Momentum, 52-Week High Strategy, Market Efficiency, Active Portfolio.
