A STUDY ON THE MOMENTUM EFFECT FOR THE BULGARIAN STOCK EXCHANGE: SOME PRACTICAL ISSUES OF APPLIED IMPORTANCE

  • Bozhidar Nedev гр. София, бул. Цариградско шосе 125, бл. 3, каб. 503
  • Boryana Bogdanova гр. София, бул. Цариградско шосе 125, бл. 3, каб. 504
Keywords: (Bulgarian Stock Exchange, momentum effect, short-term return predictability, Global financial crisis 2008, )

Abstract

The momentum effect has been studied for almost three decades. It indicates the presence of return predictability patterns on financial markets, which contradicts to the Efficient Market Hypothesis. Best (worst) past securities over the short-term tend to continue to perform well (poorly) over the subsequent period of up to 12 months. This paper examines the profitability of momentum trading strategies on the Bulgarian Stock exchange. To achieve our goal, we apply an adjusted data preparation approach to reflect the characteristics of the BSE like poor liquidity and missing data. Over our sample Jan-2004 to Jul-2017 we do not find enough evidence for momentum profits. Accounting for the financial crisis, we divide our sample into three subsamples. During the pre-crisis period (Jan-2004 to Dec-2007) we find significant momentum profits and return predictability. During the subsequent crisis period from Jan-2008 to Dec-2012 momentum effects disappears, whereas it does not reappear during the post-crisis period from Jan-2013 to Jul-2017. The latter indicates, that the BSE is still undergoing the consequences of the severe market downturn.

Author Biographies

Bozhidar Nedev, гр. София, бул. Цариградско шосе 125, бл. 3, каб. 503
ас., катедра Финанси и счетоводство
Boryana Bogdanova, гр. София, бул. Цариградско шосе 125, бл. 3, каб. 504
доц. д-р, катедра Статистика и иконометрия

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Published
2020-01-31