HEC-Ecole de gestion de l'Université de Liège
HEC-Ecole de gestion de l'Université de Liège

Analysis and optimization of a stock-picking model based on earnings momentum

Huyghebaert, Claudia ULiège
Promotor(s) : Muller, Aline ULiège
Date of defense : 22-Jun-2016 • Permalink :
Title : Analysis and optimization of a stock-picking model based on earnings momentum
Translated title : [fr] Analyse et optimisation d'un modèle de sélection d'actions basé sur le momentum de bénéfices
Author : Huyghebaert, Claudia ULiège
Date of defense  : 22-Jun-2016
Advisor(s) : Muller, Aline ULiège
Committee's member(s) : Fays, Boris ULiège
COLIN, Alexandre 
Leruth, Sophie ULiège
Language : English
Number of pages : 64
Keywords : [en] earnings momentum
[en] stock-picking
[en] factor model
[en] analysts’ consensus
[en] earnings per share
[en] earnings surprise
[en] dispersion
[en] recommendations
[en] pricing model
Discipline(s) : Business & economic sciences > Finance
Target public : Other
Institution(s) : Université de Liège, Liège, Belgique
Degree: Master en ingénieur de gestion, à finalité spécialisée en Financial Engineering
Faculty: Master thesis of the HEC-Ecole de gestion de l'Université de Liège


[en] This project-thesis has been realized in the context of an internship at AlphaSearch. This company, based in Luxembourg, provides financial services by developing an application on Bloomberg that helps investors in their stock-picking process. AlphaSearch offers several factor-based models that seek to make profit of some market anomalies such as the price momentum, the earnings momentum and the value premium.
The objective of the project-thesis was to analyze and to suggest an improvement to the earnings momentum model developed by AlphaSearch. Momentum investing is a stock investment strategy that aims to gain profit from trends existing on the market, with the belief that the trend will persist over time. Subsequently, earnings momentum is the tendency for stocks with growing earnings per share to outperform the market. Indeed, increasing earnings is usually a sign that the company is flourishing, which might be an indicator that stock price will increase as well.
To carry out this mission, the first step was to look for better factors by building one-factor investment strategies. Practically, stocks are ranked from the best to the worst, according to the value of the factor. Then, a portfolio is built in which the top 10% stocks are bought and hold for 1 month. This strategy is repeated each month from 1999 to 2015. Based on the performance of these portfolios, the six best factors were selected to be integrated in the model. This first step is closed by the optimization of the weight given to each factor in the model.
In the second phase, a backtest of the model was carried out in the U.S. universe to verify the efficiency of the model and to compare the performance of the new model to the initial one. This analysis was completed by fitting the earnings momentum model to Fama-French, Carhart and Asness’ pricing models, to explain the model’s exposure to risk factors.



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  • Huyghebaert, Claudia ULiège Université de Liège > Master ingé. gest., fin. spéc. fin. engin. (ex 2e ma.)


Committee's member(s)

  • Fays, Boris ULiège Université de Liège - ULg > HEC-Ecole de gestion de l'ULg : UER > Analyse financière et finance d'entreprise
    ORBi View his publications on ORBi
  • COLIN, Alexandre
  • Leruth, Sophie ULiège Université de Liège - ULg > HEC-Ecole de gestion de l'ULg : UER > UER Management
    ORBi View his publications on ORBi
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