Momentum and Turnover : Evidence from the German Stock Market

This Paper analyses the relationship between momentum strategies (strategies that buy stocks with high returns over the previous 3 to 12 months and sell stocks with low returns over the same period) and turnover (number of shares traded divided by the number of shares outstanding) for the German stock market. Our main finding is that momentum strategies are more profitable among high-turnover stocks. In contrast to US evidence, this result is driven mainly by winners: high-turnover winners have higher returns than low-turnover winners. We present various robustness checks, long-horizon results, evidence on seasonality, and control for size-, book-to-market-, and industry-effects. We argue that our results are useful to evaluate empirically competing explanations for the momentum effect