Finance, Markets and Valuation
Not found
Title: Market trends, momentum effect and efficient market hypothesis
Authors: Josu Eguiguren Balerdi, Francisco Guijarro
DOI: Not found
Abstract:
The main purpose of this research project has been to analyse if any profitable intra-day strategy can be designed in the German DAX index, taking into account the previous day’s trend. Regarding the pattern followed by this index, five different strategies have been ranked, including the trend strategy and mean reversion strategy. Once knowing that the DAX follows a determined pattern, the market efficiency has been tested to know how can an investor make profits from it. On the other side, the impact of Stop-Loss and Stop-Profit mechanisms has been analysed as well in terms of risk and return. The main conclusions are that the German stock market is not completely efficient because the mean reversion strategy performs better than the other ones in almost all the sample period. Moreover, the use of Stop-Losses is extremely advisable, while the application of Stop-Profits depends on the investors risk profile.
Keywords: Not found
