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10 votes
Accepted

Momentum - Statistical Argument

Preliminary This wonderful question is directly connected to the necessity of precise definitions and carefully writing in academic research: The decomposition you are asking for has two different ...
skoestlmeier's user avatar
  • 2,916
7 votes
Accepted

How to check if a portfolio has momentum bias

It kind of depends what your objective is. First, momentum 'bias' isn't well-defined. Are you looking to eliminate momentum exposure for some reason? Momentum itself isn't even well-defined really: ...
Chris's user avatar
  • 1,643
6 votes

How to calculate the JdK RS-Ratio

I think the normalisation step is incorrect. Since we would like have 100 as our baseline, it should be 100 + ((value-mean)/stddev + 1). Then we get fairly realistic results. See the following Python ...
Amateur's user avatar
  • 67
4 votes

Interpreting ACF

You need to compute the autocorrelation of the log returns $r_t$, not of the prices, $p_t$. The relationship of the log return series to the price series is $$ r_t = \log \frac{p_t}{p_{t-1}} $$ The ...
Chris Taylor's user avatar
  • 5,931
4 votes
Accepted

Does predictability in a VAR process imply mean reversion or momentum?

The point of confusion may be in thinking that a predictable price process is synonymous with a mean-reverting process while using the definitions in these papers, it's actually the opposite! In the ...
Matthew Gunn's user avatar
  • 6,954
3 votes
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What the most general but precise description one can make about mean-reversion and momentum strategies?

By mean reversion, people usually mean to say that some price process is second order stationnary -- even though they do not always know the technical term for it. It's only vague in the sense that ...
Stéphane's user avatar
  • 2,476
3 votes

Realized variance as predictor that improves momentum strategy

You are right, the authors provide no strong justification for why their method works. They just show that "it would have worked well in the past". But we should be skeptical how well it will work in ...
nbbo2's user avatar
  • 11.4k
2 votes
Accepted

volatility adjustment on momentum

With the information given I would not expect that the denominators differ. $MA_{90}$ tells you the long term price (the moving average should remove noise) while $MA_{45}$ gives you the more recent ...
Richi Wa's user avatar
  • 13.7k
2 votes

How to calculate monthly momentum strategies J6K6?

Your steps are well written and correct in general, but it seems like there are some details to clarify, which may cause your results being slightly different from previous studies. Why I am taking ...
skoestlmeier's user avatar
  • 2,916
2 votes

What is market sensitivity and momentum sensitivity?

Market sensitivity is beta of your portfolio returns to market return, momentum sensitivity is beta against your momentum returns. You'd likely want to run a multiple regression of your portfolio ...
Chris's user avatar
  • 1,643
2 votes

Factor investing and PCA

You are right: the "factors" stemming from the literature of CAPM anomalies and the "components" of PCA are not of the same nature as you underlined: factors are meant to have an ...
lehalle's user avatar
  • 12.2k
2 votes

how to implement momentum strategy for stocks in R

Thanks to @user42108 and @amdopt for yours answers! I solved in this way: I've finding functions momentum and ROC of ...
Chariot Black's user avatar
2 votes
Accepted

Are momentum returns negatively skewed?

From Daniel-Moskowitz ("Momentum Crashes") you can see that equity CSMOM has negative skewness. However, this is less clear for other asset classes. From their table 11 you can see that ...
fes's user avatar
  • 1,727
1 vote

How can momentum trading strategies work if returns are not serially correlated?

The crux of the answer is that a non-significant serial correlation will produce significant price action. Granger and Newbold (1973) showed that completely unbiased random walks of returns generated ...
demully's user avatar
  • 5,071
1 vote

How can momentum trading strategies work if returns are not serially correlated?

Let $R_d$ be the return for day $d$. Mean reversion means that $cor(R_d,R_{d+1})$, $cor(R_{d+1},R_{d+2})$, etc. are all negative--which is actually close to truth. Under conditions not too hard to ...
Michael Isichenko's user avatar
1 vote

how to implement momentum strategy for stocks in R

There are a number of resources online for momentum strategies in R, e.g. https://rviews.rstudio.com/2019/05/29/momentum-investing-with-r/ or https://alphaarchitect.com/2019/07/11/momentum-quality-and-...
user42108's user avatar
  • 2,262
1 vote

How to calculate monthly returns in R for every company in a dataset of 4000 companies?

You have not said whether the prices are sorted by date (your function requires it), and you have not said what the desired final data structure should be. But here is one way to do it. Start with ...
Enrico Schumann's user avatar
1 vote
Accepted

How to calculate monthly returns in R for every company in a dataset of 4000 companies?

I do not have a R/dplyr at my hand right now, but the following should work: ...
Kermittfrog's user avatar
  • 6,663
1 vote

Momentum factor (mom) weekly

Momentum is most often simply calculated based on monthly returns with a 12 month lookback and excluding the most recent month (ie, 11-1). There's no formula to 'transform' monthly momentum to weekly,...
Chris's user avatar
  • 1,643
1 vote

Interpreting ACF

ACF plot suggests there is autocorrelation which lasts for long time. The series is clearly not stationary. You may try differencing once - return time series, then plot boathouse ACF and PACF.
sukusi's user avatar
  • 11
1 vote

Are the causes of momentum uniform for various asset classes?

Vayanos & Woolley have proposed a unified theory of momentum & reversal due to institutional fund flows, but their analysis appears to be limited to stocks. To quote: Our explanation of ...
A. G.'s user avatar
  • 200
1 vote
Accepted

Momentum Analysis on Indices

I think there is not the exact replication of the momentum strategy you proposed in your question above. Anyway, in Gao, Han, Li & Zhou (2015) the authours suggested a methodology that can be ...
Quant.Pi's user avatar
1 vote

How to calculate the JdK RS-Ratio

It looks just like a 10 period and 30 period simple moving average crossover (ie PPO using simple moving averages)
user41616's user avatar
1 vote

implementation of risk managed momentum strategy

Barroso and Santa-Clara recommend that for risk management reasons you "scale the leverage" of the WML strategy over time, and they provide a formula for doing so. Let's say you manage 1 million ...
nbbo2's user avatar
  • 11.4k
1 vote

Calculate Returns of Momentum Strategy (Overlapping Portfolios - Jegadeesh and Titman 1993)

In Jegadeesh and Titman, and the papers that follow it, the monthly return to the strategy for the month of March is found by averaging the monthly return for Tranche 1 in March, the avg return for ...
nbbo2's user avatar
  • 11.4k
1 vote
Accepted

Interpreting description of a particular (momentum-based) data processing technique

To be fair, their description is awful but you're making this way more complicated than it is. The author is assessing two signals, one short-term and another medium-term. He has a sample universe he'...
Chris's user avatar
  • 1,643
1 vote
Accepted

How to implement momentum strategy using R

I assume that you can do a correct performance calculation for bonds (taking into account coupons, clean and dirty prices). Then for each month you can do the following: extract all live (non ...
Richi Wa's user avatar
  • 13.7k

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