Enhancement of value portfolio performance using momentum and the long-short strategy: The Finnish evidence

The authors continue the work of Bird and Casavecchia to study the performance of portfolios composed of both value and momentum stocks.  They use the Finnish stock market returns of 1993 to 2008 and form value/momentum portfolios.  They find that portfolios with a composite of valuation indicators (i.e., D/P, B/P, and EBITDA/EV) and top quintile 6-month price momentum outperformed the market by nearly 5 percentage points annually, and the volatility was decreased by 0.86 percentage points.

They went on to study the effect of using this portfolio in a 130/30 long/short strategy, thereby shorting 30% of the "glamour losers" and using those proceeds to go long 30% "value winners".  This strategy produced returns that doubled the market returns and lowered volatility by 3% points.

Leivo, T. H., & Pätäri, E. J. (2011). Enhancement of value portfolio performance using momentum and the long-short strategy: The Finnish evidence. Journal of Asset Management, 11(6), 401–416.