Abstract
By exploiting momentum strategy; “buying winner portfolio and selling portfolio” this research papers investigates the evidence against the strong form of efficiency which claims that one cannot earn excess return with historical information and excess return if any, is mere compensation of excess risk taking behavior. The study undergone during the comprehensive research reveals the evidences of the weak form of efficiency and presence of meager weak momentum effect with holding period 1 month and in rest of the cases, on inclusion of transaction cost, such strategy will perform worse than buy and hold strategy. The trading strategy has been tested on SP and to De Bondt and Thaler’s contrarian effect. In addition, the author in his research has tried to analyze the causes of momentum and contrarian effects in general and results are analyzed from the perspective of behavioral finance. Also, the paper unfolds the comprehensive analysis of the calendar effect in the markets that might contribute to the weak momentum effect observed in the result.
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