Posts tagged ‘momentum’
Is Momentum Really Momentum? (paper)
The authors of this paper ran some fairly rigorous tests on the classic J/K momentum strategy and concluded that intermediate term (7-12mos) momentum outperforms short term momentum. They claim that these results are not confined to stocks, but apply to indices, commodities, and currencies as well.
(click on title for paper)
Risk and Return in Momentum Strategies (paper)
An interesting paper on the classic Momentum strategy but with a few new twists to factor in tail risk (click on title):
“We apply risk-return ratios at the individual security level in order to drive the stock ranking process (construction of momentum portfolio) and at the portfolio level in order to evaluate and optimize the risk-return profile of the winner and loser portfolio. We investigate whether the application of risk-adjusted criteria with balanced risk-return performance can generate more profitable strategies than those based on a simple cumulative return criterion which serves as a benchmark. Moreover, by introducing risk return ratios as portfolio selection criteria, we are able to postulate a portfolio optimization problem with a ratio as an objective function. Therefore we devise an optimized-weighted strategy that creates optimal risky winner and loser portfolios”
Bleed or Blowup? Why Do We Prefer Asymmetric Payoffs?
As a trader which would you prefer: A slow bleed of small losses with occasional big winners (ala momentum strategies) or large infrequent losses with many small winners (ala mean reversion)? This interesting 2004 paper (by none other than Taleb himself) discusses.