The Alpha model documentation

Momentum On Dual Momentum Portfolios

By: Marco Simioni

In the first section, this article describes a Dual Momentum study over an iShares country etfs basket with a new attempt to improve this well-known investing style. I chose iShares because it is the world largest family of Exchange Traded Funds (ETFs) from BlackRock. Although different stock markets correlations have become weaker and weaker in these last 10 years, this article easily shows that countries diversification is still feasible.

In the second part, I briefly recall another Dual Momentum Portfolio, the Famous 5 Portfolio, and apply to momentum concept to the two portfolios. This results in a new comprehensive strategy that rotate monthly from Countries Portfolio to the Famous 5 Portfolio or viceversa.

My backtest, highlight that momentum persists not only through single different assets (etfs) but through portfolios as well.

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Combining diversified alpha to deliver superior Sharpe

By Marcus Williamson

In this article I show that very basic quantitative trading strategies that generate returns from different market behaviours, when combined, can provide a more desirable and stable returns stream, as reflected in a Sharpe ratio higher than any individual strategy. We show how absolute returns can be some-what ‘sacrificed’ for an improved risk adjusted return stream, which then can be later leveraged as per the investors risk appetite. Read more

Momentum Strategies

By Rutendo Kadzikano

Pinto, Henry, Robinson and Stowe (2010) define momentum indicators as valuation indicators that are based on the relationship between price or another fundamental, earnings for example, to a time series of its historical performance or to the fundamental’s expected future performance values. When the strategy uses earnings then it is an earnings momentum strategy and in the case of using price then it is a momentum strategy. Momentum strategies can either be relative or absolute. Relative strategies compare the momentum of different assets to each other and absolute momentum is not concerned with the performance of other assets as it only focuses on that stocks past return in predicting future returns. Read more

Momentum Crashes

By Fortune Chiwewe

Seminal work by Jegadeesh and Titman (1993) found that past winners outperform past losers over a horizon of 3-12 months. Investors thus take a long position on winner stocks and a short position on loser stocks in order to realise anomalous profits. This strategy is widely adopted and appears to be timeless in terms periodically not functioning but never completely disappearing. This paper sets to investigate what happens when the strategy does not work, i.e. when momentum crashes. Read more

The Origins of Momentum

By Fortune Chiwewe

Momentum is a market anomaly which many people have tried to explain but have not succeeded to a satisfactory extent. As to the source of momentum profits, others have tried to rationalize their origins whereas an opposing school of thought has searched for their origins in behavioural finance. In this paper I will explore the possible origins of momentum profits through highlighting the important aspects of both the rational and the behavioural field. Read more

Behavioural theories behind momentum

 

By Rutendo Hazel Kadzikano

There isn’t a general consensus on what really causes momentum. On the one hand others argue using behavioural theories that state that momentum is a result of “naïve investors with biased expectations” Hvidkjaer (2006) and on the other hand, others argue that momentum is a product of the “rational response that individuals have to real market constraints” (Scowcroft & Sefton, 2005). Read more