Investment Strategies, Performance, And Trading Information Impact

Abstract

This paper examines a set of investment strategies based on past market information to evaluate performance and trading impact on the Canadian Market. In doing so, we assess whether trading information adds value to the effectiveness of these strategies. Utilizing variant models of four different methodologies, we find strong evidence that supported the Momentum Investment Strategy, which buys past winner stocks and sells past loser stocks. Our evidence did not support Contrarian Investment Strategy, which posits that investors overreact to good and bad news. Our winners’ portfolios outperform our losers’ portfolios.  The Negative Volume Effect Strategy did not work, which is contrary to the Foerster, Prihar and Schmitz (1995) study. We found that winners’ stocks did not reverse in cases of heavy volume; nor did loser stocks reverse in a high volume context. However, we did find that trading information has an impact on stock returns and thus adds value to investment strategies for the 1990 to 2000 investment period.  Investors who combine past price and trading volume information in constructing their investment strategies would achieve higher returns than investors who base their portfolio construction decisions solely on stock prices.University.