Graduation Year

Spring 2014

Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics

Reader 1

Eric Hughson

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Rights Information

© 2014 Joshua Rosenberg

Abstract

It is well understood through previous literature that strategies, which buy past winning stocks and sell past losing stocks, can generate significant positive returns. This phenomenon is known as the momentum effect in the stock market. Furthermore, there is a common accounting practice used by portfolio managers called tax loss harvesting.Tax loss harvesting is the practice of selling a security in order to create a benefit for tax purposes. This paper attempts to build upon previous literature by explaining why the momentum effect is different at the beginning of the calendar year than in the middle and assessing whether or not tax loss harvesting may play a role. A trading strategy was created which calculates the returns of winning and losing portfolios intra industry groups, around different months of the year, in attempt to explain fluctuations in the momentum effect. Evidence in support of the hypothesis that tax loss harvesting played a role in impacting momentum strategies did not prove to be statistically significant.

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