Privatization and Industry Momentum Strategies in Pakistan

Abstract

In this paper, we examine the sources of profits to momentum strategies of buying past winner industry portfolios and selling short past loser industry portfolios using the privatization environment in Pakistan over the period of 1991-2005. Our empirical results suggest a 6 percent return per month which is consistent with the result of Moskowitz and Grinblatt (1999) for U.S. industry portfolios. In addition, our results strongly suggest that privatized sectors have contributed to profitability of the momentum strategies significantly compared to non-privatized sector. Our findings have implication for the portfolio selection and management for those investors managing assets in countries under taking privatization deals.

Keywords: momentum, privatization, Industry returns, autocorrelation