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Enhanced Momentum Strategies
In: Journal of Banking and Finance, Forthcoming
SSRN
Working paper
ON INDUSTRY MOMENTUM STRATEGIES
In: The journal of financial research: the journal of the Southern Finance Association and the Southwestern Finance Association, Band 43, Heft 1, S. 95-119
ISSN: 1475-6803
AbstractIn this article, we investigate industry momentum strategies. We find that industry portfolios that outperformed in the previous month generate on average significantly higher returns in the holding period than those that underperformed. Plain and risk‐managed strategies using this short‐run industry momentum are not subject to optionality effects. Also, the tail risks of these strategies are uncorrelated with traditional industry momentum strategies. The spread associated with the risk‐managed strategy both meets necessary conditions as a risk factor and is significantly priced in the cross‐section of U.S. industry portfolios.
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Working paper
SSRN
Working paper
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US tech ETF momentum strategies
Momentum strategies sustained on buying past winners and selling past losers undermined the paradigm of the financial markets, grounded on the Efficient Market Hypothesis, due to being possible to uncover profitable trading patterns by solely analysing past stock behaviour. Afterward, behavioural finance emerged, relying on cognitive bias and investor irrationality to interpret momentum. This paper tests the implementation of momentum strategies using sectorial ETFs, particularly US technological ETFs. ETFs are financial instruments that track indexes and compose a basket of diversified securities. Consequently, 20 technological ETFs traded daily from 2010-2019 (10 years) were selected and implemented a total of 36 momentum strategies with rising formation periods. The WML portfolios delivered returns non-significant from zero throughout all timeframes. Notably, the returns of the winners and losers' portfolios unveiled similar positive results. These results are justified by the exceptional performance of the technological indexes, driven by overconfident agents and government politics to stimulate technological innovation. Hence, ETF lower exposure to idiosyncratic risk assembled with favourable market conditions resulted in losers portfolios with positive returns. Lastly, the differential between the ETFs price and the NAV are structurally corrected by AP´s, making it more complex for ETFs prices to drift away from the NAV, undermining the conditions to surface momentum. ; Momentum Trading suportado na compra de winners e na venda de losers, comprometeu o paradigma dos mercados financeiros alicerçado na Teoria dos Mercados Eficientes, devido a ser viável encontrar padrões lucrativos de trading pela análise do comportamento passado de ações. Posteriormente, emergiram as Finanças Comportamentais, apoiadas em enviesamentos cognitivos e na racionalidade limitada dos agentes de mercado para interpretar momentum. Este estudo testa a implementação de estratégias de momentum utilizando ETFs sectoriais, particularmente ETFs tecnológicos dos Estados Unidos da América. ETFs são instrumentos financeiros que replicam a performance de índices e são compostos por um conjunto diversificado de ações. Consequentemente, foram selecionados 20 ETFs tecnológicos negociados diariamente entre 2010-2019 (10 anos) e concretizados um total de 36 estratégias de momentum com períodos de formação crescentes. O portfolio WML conferiu retornos não significativos ao longo de todos os prazos. Em particular, os retornos dos portfolios winners e losers revelaram resultados positivos. Estes resultados são justificados pela performance exceptional dos índices tecnológicos, suportados pela excessiva confiança dos investidores neste setor e em políticas estatais que promovem a inovação. Adicionalmente, a menor exposição dos ETFs ao risco idiossincrático reunido com as condições favoráveis de mercado proporcionou os retornos positivos dos losers portfolios. Por último, o diferencial entre o preço dos ETFs e o NAV são estruturalmente corrigidos pelos AP´s, tornando mais complexo que os preços dos ETFs se afastem do NAV, não criando condições favoráveis para emergir momentum.
BASE
Momentum Strategies with L1 Filter
In: Journal of Investment Strategies 3(4), 1–26
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Analysts' Underreaction and Momentum Strategies
In: Journal of Economic Dynamics and Control, Forthcoming
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Analysts' underreaction and momentum strategies
In: Journal of economic dynamics & control, Band 146, S. 104560
ISSN: 0165-1889
SSRN
Working paper
Firm Attributes and Momentum Strategies in China
In: The Chinese economy: translations and studies, Band 50, Heft 1, S. 59-77
ISSN: 1558-0954
Market states and international momentum strategies
In: The quarterly review of economics and finance, Band 46, Heft 3, S. 437-446
ISSN: 1062-9769
Exploration of CTA Momentum Strategies Using ETFs
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Momentum strategies in times of economic policy uncertainty
In: Journal of financial economic policy, Band 13, Heft 3, S. 285-300
ISSN: 1757-6393
Purpose
This paper aims to evaluate the influence of economic policy uncertainty (EPU) on the momentum effect, analysing its influence depending on the economic cycle and in different quantiles.
Design/methodology/approach
To determine the influence of EPU in the momentum effect taking into account the economic cycle and the level of the quantile, linear regression and quantile regression have been applied for the period from 2 January 1985 to 30 April 2019 for the US stock market.
Findings
It is shown that an increased feeling of insecurity associated with EPU reduces the momentum effect, especially in times of recession. Distinguishing by quantiles, an asymmetry in the impact of EPU in the momentum effect is discovered, finding that EPU reduces (increases) the profits of momentum strategies in the lowest (highest) quantiles. In the highest quantiles, an investor can obtain higher extraordinary returns with this strategy. For example, in the highest quantile, a one-point increase in the EPU levels would have increased the daily profitability by 12.7 basis points. These findings have important implications for investors and policymakers.
Originality/value
To the best of the authors' knowledge, this is the first paper that evaluates the influence of EPU on the momentum effect by conducting an analysis based on the economic cycle and different quantiles, demonstrating how these factors are relevant in the influence of this uncertainty in the momentum anomaly.