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Amplifying Momentum with Volume and Accounting Indicators

Posted in Fundamental Valuation, Momentum Investing, Technical Trading

Can investors enhance momentum returns for individual stocks with combination strategies that incorporate other technical and accounting indicators? In the April 2010 draft of their paper entitled "Technical, Fundamental, and Combined Information for Separating Winners from Losers", Cheng-Few Lee and Wei-Kang Shih investigate combined momentum strategies based on past stock returns, past trading volume and sets of fundamental (accounting) indicators. They consider two distinct sets of fundamentals: Piotroski's FSCORE for value stocks and Mohanram's GSCORE for growth stocks. Their combined strategy is long (short) past winners (losers) with weak (strong) past relationship between returns and trading volume and high (low) fundamental scores. Using stock return/volume and firm fundamentals data for a broad sample of NYSE and AMEX non-financial stocks spanning 1982-2007 (26 years), they find that:

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