Enhancing a value portfolio with price acceleration momentum

• Main Author: Schoeman, Cornelius Etienne
• Other Authors: Halfer, Dieter
• Published: University of Pretoria 2013
• Subjects: UCTD; Time series; Cumulative average abnormal returns (caar); Price acceleration; Momentum; Value
• Online Access: http://hdl.handle.net/2263/22827; Schoeman, CE 2012, Enhancing a value portfolio with price acceleration momentum, MBA dissertation, University of Pretoria, Pretoria, viewed yymmdd < http://hdl.handle.net/2263/22827 >; http://upetd.up.ac.za/thesis/available/etd-02242013-124453/

Value shares are notorious for remaining stagnant for extended periods of time, forcing value investors to remain locked in their investments often for excessive periods. This research study applied the price acceleration momentum indicator of Bird and Casavecchia (2007) on a value portfolio with the objective of improving the timing of value share acquisitions.A time series study was conducted, taking into account the top 160 JSE shares over the period 1 January 1985 to 31 August 2012. A price acceleration momentum indicator was applied to enhance a value portfolio formed on the basis of book-tomarket ratio, dividend yield and EBITDA/EV. Cumulative average abnormal returns (CAAR) were used to compare portfolio results statistically.A substantial contribution is made to the literature by proving that a value-only portfolio can be significantly enhanced by the combination of price acceleration momentum. Results indicated an increase in CAAR from 199.83% to 321.29%. Risk-adjusted returns (Sharpe ratio) were also improved without the detriment of increased share price volatility (standard deviation). This research study further contributes to the literature by proving that a price acceleration momentum indicator adds no additional value over a value portfolio combined with ordinary price momentum. === Dissertation (MBA)--University of Pretoria, 2012. === Gordon Institute of Business Science (GIBS) === unrestricted