Abstract
The objective of the paper is to test relative strength hypothesis, which states that the stocks, which have done better than market in the past should continue to do so in future. The objective is pursued with the help of data on closing stock prices of 49 companies for the period April 1996 to March 2000. The Spearman's rank correlation using data on returns of 49 stocks for lag period of one-month, three-months, six-months and one-year is computed. The results indicate that relative strength hypothesis may be accepted for 1-month lag period. However, there is not enough evidence for relative strength hypothesis to hold good for lag periods of 3-months and above. The paper concludes by discussing the mplications of the study and suggestions for future research.
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