The momentum effect is a widely-documented phenomenon in finance. One of the first studies to document this effect was written by Jegadeesh and Titman (JF, . This set of Python code is written based on the original SAS code that replicates the Jegadeesh and Titman (JF, ) momentum strategy. Please refer to the. This paper evaluates various explanations for the profitability of momentum strat- egies documented in Jegadeesh and Titman (). The evidence indicates.
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Momentum Strategy Jegadeesh and Titman – Statalist
This method is simple, though perhaps not completely realistic or not to everybody’s taste other methods of calculation are also possible. It is a while since I looked at this, so this is not a jegaeeesh answer. For every Month I sum up these two observations and take the Mean.
Also other people here may have inputs in the meantime I would really appreciate your help! Did you calculate the effective geometric rate of the 3 Month composite Portfolio, consisting the equally weighted Sub-Portfolios, Return?
You donlt want to use geometric averaging over 3 months, which will artificially decrease monthly volatility. As shown in the diagram Tranche 1 consists of those stocks bought at the end of December and held in Jan, Feb, Mar and so on for the other tranches.
But I don’t know which tutman I have to calculate to implement my Momentum Strategy properly. In March, I calculate the Return of Tranche 1. At the end I sum jeadeesh Return of each Month up and take the mean of that to have the Monthly Returns of my actual Strategy. This continues every Month. I work with discrete monthly Returns. It was a short sale and the returns are due to falling stock prices.
My attempt would be: Somehow my sell Returns are pretty high such that i just a Buy – Sell Return of 0, Post as a guest Name. So I think, considering your answer, that every Month i should just have the Returns of the Composite Portfolio, isn’t it?
Is this the proper way to calculate the Returns of a Momentum Strategy? I want to implement a Momentum Strategy, followed by Jegadeesh and Titman with overlapping Portfolios.
Quick Link to the paper Unfortunately the Method is poorly described: In Jegadeesh and Titman, and the papers that follow it, the monthly return to the strategy for the month of March is found momenntum averaging the monthly return for Tranche 1 in March, the avg return for Tranche 2 in March and the monthly return for Tranche 3 in March.
I really would appreciate if you could check you notes! It’s acutally a return as jebadeesh. But I can also calculate the Return of the composite Portfolio vertical aggregation for the month March.
This question comes up fairly often, there may be previous answers on this site. Or just the composite Portfolio Return in March? But IIRC the method used in the paper is mmoentum you call vertical aggregation by month. Do you know why it is like that? Sign up using Email and Password. Home Questions Tags Users Unanswered.
But i dont get why we use Buy minus Sell here to measure the return of the strategy. I will check my notes later today and get back to you. I want to duplicate their results. Or do I just calculate composite Portfolio Returns? Sign up using Facebook.