Are credit ratings effective on a momentum investment strategy? An empirical study

Abstract

This dissertation investigates the existence of momentum effect for stocks differentiated by their credit rating, provided by S&P in a sample of 23790 listed companies from the US Market between 1987 and 2017. I analyse two types of credit rating categories, Investment grade and Speculative grade. The average credit ratings form an inverted U-shape across the various momentum portfolios, suggesting that a momentum strategy of buying previous winners and selling previous losers essentially takes long and short positions in firms with the lowest credit risk respectively.

Date of Award	26 Jan 2023
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Mário Meira (Supervisor)