This paper analyses the impact of industrial diversification on the profitability of contrarian and momentum strategies. Our findings show that the momentum strategy seems to be no more profitable in the recent years. In fact, while momentum strategies earn large positive and significant returns before the 2000 crash, these returns are negative after the crash. Then, firms are classified into two groups according to the intensity of their industrial diversification by the Ward (1963) method. We find that, for the non-diversified sample, no effect is significant. However, for the diversified sample, the significant contrarian effect observed in the medium term disappears in the long run. Before the crash, we find a more pronounced momentum effect for the non-diversified sample. After the crash, we identify a contrarian effect more important for this sample. Moreover, the Bootstrap without replacement results do not support the risk based explanation. Keywords : corp o rate diversi f i c at i o n, mo m e n t u m , Boo tstra p, cross-sectiona l varia nce of expected retur n, risk

This paper analyses the impact of industrial diversification on the profitability of contrarian and momentum strategies. Our findings show that the momentum strategy seems to be no more profitable in the recent years. In fact, while momentum strategies earn large positive and significant returns before the 2000 crash, these returns are negative after the crash. Then, firms are classified into two groups according to the intensity of their industrial diversification by the Ward (1963) method. We find that, for the non-diversified sample, no effect is significant. However, for the diversified sample, the significant contrarian effect observed in the medium term disappears in the long run. Before the crash, we find a more pronounced momentum effect for the non-diversified sample. After the crash, we identify a contrarian effect more important for this sample. Moreover, the Bootstrap without replacement results do not support the risk based explanation. Keywords : corp o rate diversi f i c at i o n, mo m e n t u m , Boo tstra p, cross-sectiona l varia nce of expected retur n, risk