Combining Technical and Fundamental Trading Strategies (eBook)

Dr. Ute Bonenkamp received her doctoral degree at the University of Cologne. Her supervisor was Prof. Dr. Carsten Homburg from the Department of Management Accounting.

Geleitwort 6
Vorwort 8
Table of Contents 10
List of Figures 13
List of Tables 15
List of Abbreviations 17
List of Symbols 19
Latin Symbols 19
Greek Symbols 23
Further Symbols 24
1 Introduction 25
1.1 Motivation and Research Questions 25
1.2 Structure of the Thesis 28
2 Basics about Technical and Fundamental Trading 29
2.1 Efficient Markets versus Active Trading 29
2.2 Technical Trading Strategies 32
2.2.1 Technical Trading at a Glance 32
2.2.2 The Price Momentum Strategy Jegadeesh and Titman (1993) 34
2.3 Fundamental Trading Strategies 37
2.3.1 Fundamental Trading at a Glance 37
2.3.2 The Operating Cash Flow Strategy Sloan (1996) 39
2.4 Combination of Technical and Fundamental Trading 43
2.4.1 Potential of Combining Fundamental and Technical Trading 43
2.4.2 Related Literature 44
3 Combination of Momentum and Operating Cash Flow Strategies 46
3.1 Idea and Motivation 46
3.2 Profits of the Pure and Combination Strategies 48
3.2.1 Methodology and Sample 48
3.2.2 Empirical Results and Discussion 54
3.3 Decomposition of the Outperformance 59
3.3.1 Introduction and Methodology 59
3.3.2 Empirical Results and Discussion 63
3.4 Alternative Explanations for the Combination Effect 65
3.4.1 Extremity of Momentum and Operating Cash Flows 65
3.4.2 Earnings Surprises, Accrual Anomaly, and Idiosyncratic Risk 66
3.5 Practicability of the Trading Strategies 71
3.5.1 Portfolio Size 71
3.5.2 Stock Size 72
3.5.3 Stock Liquidity 74
3.5.4 Success after Trading Costs 75
3.6 Summary and Conclusion 77
4 A Closer Look at the Market Reactions 79
4.1 Introduction and Motivation 79
4.2 Preliminary Analysis: Reference Trading Strategy 81
4.3 Market Reactions in the Short Term 85
4.4 Returns Surrounding Earnings Announcements 91
4.5 Influence of Investor Attention 98
4.6 Market Reactions in the Long Term 104
4.7 Summary and Conclusion 110
5 Fundamental and Technical Trading by Mutual Funds 113
5.1 Introduction and Motivation 113
5.2 Framework for the Mutual Fund Analysis 115
5.3 Stock Universe of Mutual Funds 122
5.4 Pursuit of the Trading Strategies 127
5.5 Success of the Trading Strategies 144
5.6 Decomposition of Mutual Fund Returns 157
5.7 Summary and Conclusion 163
6 Concluding Remarks 165
6.1 Summary of Results 165
6.2 Limitations and Propositions for Future Research 167
References 169