Investigating momentum on the Johannesburg Stock Exchange
The original publication is available at http://www.isem.org.za/index.php/isem/isem2011
Conference of the ISEM 2011 Proceedings, Stellenbosch, South Africa, 21 - 23 September 2011.
Conference theme - Innovative Systems Thinking: Unravelling Complexity for Successful Solutions
The paper examines if stock price momentum is a common trait amongst top performing shares on the Johannesburg Stock Exchange and whether individual investors can harness the relationship of momentum and return to create a profit. The viability of the phenomenon as an investment strategy was gauged by comparing annualised average returns of momentum shares, identified through both technical analysis as well as price performance momentum measures, against the market capitalisation weighted JSE All Share Index as well as against an un-weighted representation of the market. The results revealed a seemingly unmistakable co-dependence between momentum and return, with statistically significant trends being ever present. Applying the maximum taxes and trading costs revealed that the highest ranked momentum shares did indeed outperform both market benchmarks from the period of January 1990 to August 2009, suggesting the validity of the philosophy as an investment strategy.