Abstract
Using only the 200 large-cap securities that make up the NYSE 100 and NASDAQ 100, this study investigates 130 randomly selected formation periods from January 2000 through December 2012. During these formation periods, the three worst and three best performing stocks (based on excess return) are flagged. Once flagged, the subsequent 10-day holding period excess returns are calculated. Results indicate that NYSE securities demonstrate significant return reversal, but not return momentum. Conversely, the worst performing NASDAQ securities demonstrate return reversal, whereas the best performing NASDAQ securities demonstrate return momentum. Results are robust to the number of best and worst stocks that are flagged. Results are also robust to other combinations of formation and holding period lengths.
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