Momentum Optimization Portfolio on the Russian Stock Market

This Master’s dissertation was aimed to test the presence of momentum effect and weak form efficiency of the Russian stock market using the weekly returns data for the period from 2003-2019 based on the stocks included in the MICEX Index. The hypothesis of the thesis is that the optimal portfolio constructed on the traditional momentum strategies is able to outperform the market. The hypothesis received supporting statistically significant results for the momentum strategies based on the following parameters 12/12, 12/24, 24/12, 24/24, 24/36 (formation period/investment period in weeks). During the 2009-2011, which is the period of market recovery from the global financial crisis 2008, strategies 12/12, 12/24, 12/36 achieved statistically significant alphas of 10%, 7%, and 7% respectively, what indicates that short term momentum strategies can achieve strong abnormal returns. For the periods from 2003-2019 was tested an average alpha of the momentum portfolios. Statistically significant results were achieved for the strategy 36/12, which showed the worst performance out of all strategies losing against the market on average 10% yearly. At the same time, the absence of reliable results on alpha for the rest of the strategies including profitable ones on a simple return base may indicate that the returns on the momentum strategies are due to the higher additional risk taken. Therefore, the implications of the study for efficient market theory are ambiguous.