The Profitability of Momentum Trading Strategies in the Irish Equity Market

We examine the profitability of momentum based trading strategies in the Irish equity market between 1988 and 2007. We investigate a range of trading strategies over alternative backward looking ranking periods and forward looking holding horizons as well as for alternative size momentum portfolios. We find that returns to momentum based strategies are highly non-normally distributed giving rise to concern about the validity of inferences based on standard statistical tests of their abnormal performance. We therefore apply a bootstrap procedure to construct nonparametric p-values for the portfolio performance measures. Overall, we find very little evidence that momentum based trading strategies would have yielded an abnormal risk adjusted return over the period. The Irish equity market appears to be quite efficient in this respect