Does industry concentration explain the profits of the investment strategy?

Abstract

This dissertation investigates the role of industry concentration in explaining the profitability of the Conservative Minus Aggressive (CMA) investment strategy. While previous studies have established the return premium associated with conservative investment policies, the economic mechanisms driving the CMA strategy remain underexplored. This study builds upon the work of Moskowitz & Grinblatt (1999) on industry momentum and extends their framework to assess the impact of industry concentration on investment strategy returns. The analysis examines whether industry dynamics explain CMA profits by replicating and expanding their methodology. This study applies multiple portfolio sorting techniques to isolate industry effects. The findings indicate that industry concentration does not significantly explain investment-based returns, confirming that it is not the main driver of CMA profitability.

Date of Award	15 Jul 2025
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Francisco José Guedes dos Santos (Supervisor)