Technical, Fundamental, and Combined Information for Separating Winners from Losers
The main purpose of this paper is to use both fundamental and technical information to improve the technical momentum strategy. We examine how fundamental accounting information along with the technical information such as past returns and past trading volume data can be used by investors to separate momentum winners from losers. Previous research has shown that the technical momentum strategy based on the past winners and losers in terms of cumulative returns, generates significantly positive returns in the subsequent periods. This paper proposes a unified framework of incorporating the fundamental indicators FSCORE (Piotroski (2000)) and GSCORE (Mohanram (2005)) into the technical momentum strategy. We have developed three hypotheses to test whether combined momentum strategy outperform the technical momentum strategy or not. From the empirical results of these three hypotheses, we conclude that the combined momentum strategy outperforms technical momentum strategy by generating significantly larger returns for both growth and value stocks.
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