Doctoral thesis: Essays on Momentum and Risk

Doctoral thesis: Essays on Momentum and Risk

M.Sc. (Econ.) John Pettersson defends his doctoral thesis in Finance on Friday 14 August 2015 in Vaasa.

The existence of momentum in market prices, i.e. that the price of assets tends empirically to continue to move in the same direction, is in conflict with traditional financial theory. Nevertheless, momentum can be found in prices on a global level and among most asset types.

"The high momentum returns among high-risk stocks are due to an overreaction among investors," says John Pettersson. "This overreaction shifts fairly quickly into a counter movement, in which the market price is adjusted back towards the fundamental value of the asset. Among low-risk shares, momentum is caused by new information slowly being incorporated into market prices."

Several alternative pricing models have attempted to explain why momentum continues to exist in financial markets on a global level. In his doctoral thesis entitled "Essays on Momentum and Risk”, John Pettersson tests alternative pricing models that are based on behavioural science.

"My results show that it is not uncertainty about the information that causes higher momentum (as applied by the pricing models), but rather the general view of the asset's risk among investors."

As investors can benefit from this market anomaly to create investment strategies, momentum is also of interest from an economic perspective. The results presented in Pettersson's thesis can be applied directly to improve the efficiency of a momentum-based investment strategy.

M.Sc. (Econ.) John Pettersson defends his doctoral thesis in Finance: "Essays on Momentum and Risk" on Friday 14 August 2015.

Time: 14 August 2015, at 12
Place: Promotionssalen, Hanken School of Economics, Vaasa
Opponent: Professor Mika Vaihekoski, Åbo Akademi University
Custos: Professor Johan Knif, Hanken School of Economics

A copy of the thesis can be downloaded at: http://hdl.handle.net/10138/155628

 

For further information, please contact:

John Pettersson
john.pettersson@hanken.fi
+358 50 3738 343