Momentum Trading in New York Stock Exchange (Nyse) Energy Stocks

Abstract

This paper investigates whether the momentum effect exists in the NYSE energy sector. Momentum is defined as the strategy that buys (sells) these stocks that are best (worst) performers, over a pre-specified past period of time (the 'look-back' period), by constructing equally weighted portfolios. Different momentum strategies are obtained by changing the number of stocks included in these portfolios, as well as the look-back period. Next, their performance is compared against two benchmarks: the equally weighted portfolio consisting of most stocks in the NYSE energy index and the market portfolio, and the S&P500 index. The results indicate that the momentum effect is strongly present in the energy sector, and leads to highly profitable portfolios, improving the risk-reward measures and easily outperforming both benchmarks.

Is Technical Analysis Profitable on Renewable Energy Stocks? Evidence from Trend-Reinforcing, Mean-Reverting and Hybrid Fractal Trading Systems

“…A limited number of studies have investigated energy markets using different tools for predictions, such as those of [11][12][13][14]. Chen et al [11] found that combining information content of oil price ranges and graphical information of time series provides more accurate predictions of oil price movements than traditional models.…”

“…Chen et al [11] found that combining information content of oil price ranges and graphical information of time series provides more accurate predictions of oil price movements than traditional models. Based on 168 energy stocks included in the NYSE Energy Index, Thomakos and Papailias [14] observed a strong presence of the momentum effect in the energy sector of which risk-reward characteristics can be exploited through various momentum trading strategies. Lin et al [13] tested the predictive ability of technical trading rules proposed by Sullivan et al [15] based on daily returns for thirteen energy market indices.…”

Functional smoothing for risk management of energy assets

“…While it is not possible to review the related literature in this paper, a number of representative references can provide a clear idea about the importance of energy sector investing. For example, see Papailias and Thomakos [7,8] who have employed an improved moving average methodology in energy related ETFs resulting in higher profits and decreased risk and investigate whether the momentum effect exist in the NYSE energy sector portfolio. They conclude that the momentum effect is strongly present in the energy sector, and leads to highly profitable portfolios, improving the risk-reward measures and easily outperforming typical performance benchmarks.…”