Momentum and reversal effects in Brazil

• Ano de defesa: 2012
• Autor(a) principal: Improta, João Paulo de Barros
• Tipo de documento: Dissertação
• Tipo de acesso: Acesso aberto
• Idioma: eng
• Instituição de defesa: Biblioteca Digitais de Teses e Dissertações da USP
• Palavras-chave em Português: Ações; Anomalias de mercado; Brasil; Brazil; Economia; Economy; Efeito contrário; Efeito momento; Fama & French; Finanças; Finance; Financial market anomalies; Momentum effect; Reversal effect; Stocks
• Link de acesso: http://www.teses.usp.br/teses/disponiveis/12/12138/tde-15032013-165910/

In financial markets, momentum effect can be defined as the tendency of prices to maintain their short term movements. On the other hand, reversal effect is usually understood to be the change in direction of long term price movements. This paper examines whether momentum and reversal effects were in evidence in the Brazilian stock market between January 1999 and June 2012. After calculating 1296 trading strategies, no evidence of reversal effect is found. With regard to momentum effect, some weak evidence is presented for the very short term. Exposure to risk factors can explain returns on strategies, including returns on momentum strategies. The results are borne out with different market proxy specifications and size subsamples. When compared to previous studies, the results raise the question of whether the reversal effect is vanishing from the Brazilian stock market and whether the traces of momentum are sufficient to confirm its existence. Furthermore, evidence of seasonality is found for June in momentum strategies and for November in both reversal and momentum strategies. Subsequent tests reveal that the effects of seasonality are limited to small stocks.