Momentum Strategies: Profitability and Evaluation of Explanations on the Tunisian Market

We examine the profitability of momentum strategies in the Tunisian stock market over the period (January 1998-December 2007). We adopt the methodology of Jegadeesh and Titman (1993). The results show that momentum strategies are profitable. We use the methodology of Lo and Mackinlay (1990) and the methodology of Jegadeesh and Titman (1995) to decompose the profits. The results confirm the hypothesis of risk’s recompense of profits. The profitability of momentum strategies not implies the inefficiency of stock market. It than implies the failure of stock pricing model. However, we find that the addition of the momentum factor and a sentiment variable to three factor model of Fama and French, improves the chronological description of portfolio returns.