Search for Alpha-Ema Weighted Momentum Based Approach

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 S&P Nifty between periods of 2000 to 2013. The significance of this period is that it includes both bull and bear era. In fact, period between 2002 and 2007 was predominantly a bull era backed by strong economic growth whereas period between 2007 and 2012 was period of extreme distress with economic activity contracting globally. Research focused on periods with such structural breaks ensures the obtained results are significant and not merely a fluke. Noteworthy, the results obtained are expected as per general weak efficient market hypothesis and are contrarian to momentum effect by Narasimhan Jegadeesh for mid-long- term; 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