Exploiting Predictability in the Returns to Value and Momentum Investment Strategies PDF Download
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Author: Elton Babameto
Publisher:
ISBN:
Category :
Languages : en
Pages : 36
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Book Description
There is now widespread evidence that investment strategies based on value and momentum have been profitable in the past. Moreover, combining value and momentum into a single investment strategy provides investment performance that is less sensitive to market cyclicality. However, portfolio managers may be reluctant to implement such strategies as they can lead to substantial departures from client-assigned benchmarks. In this paper, we implement a combined value-momentum strategy using the Black-Litterman portfolio optimisation framework, applied to a single global market comprising 177 national industry indices of the US, UK and Japan. We develop forecasting models for zero-investment value and momentum strategies, and incorporate the out-of-sample forecasts from these models into the Black-Litterman approach. The combined value-momentum strategy yields a significant improvement in performance relative to the underlying benchmark. Using the Black-Litterman model, we can effortlessly track the benchmark at the desired tracking error level under full investment, long-only and beta-neutral constraints, while producing an average annual investment outperformance of up to 0.7 percent, even after allowing for substantial transaction costs.
Author: Elton Babameto
Publisher:
ISBN:
Category :
Languages : en
Pages : 36
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Book Description
There is now widespread evidence that investment strategies based on value and momentum have been profitable in the past. Moreover, combining value and momentum into a single investment strategy provides investment performance that is less sensitive to market cyclicality. However, portfolio managers may be reluctant to implement such strategies as they can lead to substantial departures from client-assigned benchmarks. In this paper, we implement a combined value-momentum strategy using the Black-Litterman portfolio optimisation framework, applied to a single global market comprising 177 national industry indices of the US, UK and Japan. We develop forecasting models for zero-investment value and momentum strategies, and incorporate the out-of-sample forecasts from these models into the Black-Litterman approach. The combined value-momentum strategy yields a significant improvement in performance relative to the underlying benchmark. Using the Black-Litterman model, we can effortlessly track the benchmark at the desired tracking error level under full investment, long-only and beta-neutral constraints, while producing an average annual investment outperformance of up to 0.7 percent, even after allowing for substantial transaction costs.
Author: Wesley R. Gray
Publisher: John Wiley & Sons
ISBN: 111923719X
Category : Business & Economics
Languages : en
Pages : 215
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Book Description
The individual investor's comprehensive guide to momentum investing Quantitative Momentum brings momentum investing out of Wall Street and into the hands of individual investors. In his last book, Quantitative Value, author Wes Gray brought systematic value strategy from the hedge funds to the masses; in this book, he does the same for momentum investing, the system that has been shown to beat the market and regularly enriches the coffers of Wall Street's most sophisticated investors. First, you'll learn what momentum investing is not: it's not 'growth' investing, nor is it an esoteric academic concept. You may have seen it used for asset allocation, but this book details the ways in which momentum stands on its own as a stock selection strategy, and gives you the expert insight you need to make it work for you. You'll dig into its behavioral psychology roots, and discover the key tactics that are bringing both institutional and individual investors flocking into the momentum fold. Systematic investment strategies always seem to look good on paper, but many fall down in practice. Momentum investing is one of the few systematic strategies with legs, withstanding the test of time and the rigor of academic investigation. This book provides invaluable guidance on constructing your own momentum strategy from the ground up. Learn what momentum is and is not Discover how momentum can beat the market Take momentum beyond asset allocation into stock selection Access the tools that ease DIY implementation The large Wall Street hedge funds tend to portray themselves as the sophisticated elite, but momentum investing allows you to 'borrow' one of their top strategies to enrich your own portfolio. Quantitative Momentum is the individual investor's guide to boosting market success with a robust momentum strategy.
Author: Devraj Basu
Publisher:
ISBN:
Category :
Languages : en
Pages : 27
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Book Description
We construct unconditionally efficient asset allocation strategies that exploit return predictability of international size and momentum portfolios. The strategies achieve comparable returns to these investment assets while exhibiting much lower volatility. They largely avoid major losses by successfully timing these assets. The strategies utilizing the MSCI world index and the term spread as predictive variables achieve better performance than those without exploiting return predictability. The optimal strategies perform better than conditionally efficient strategies due the conservative response of the optimal portfolio weight to extreme realizations of the predictive variables, thus leading to lower volatility.
Author: Stephen Satchell
Publisher: John Wiley & Sons
ISBN: 1119599326
Category : Business & Economics
Languages : en
Pages : 448
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Book Description
A one-of-a-kind reference guide covering the behavioral and statistical explanations for market momentum and the implementation of momentum trading strategies Market Momentum: Theory and Practice is a thorough, how-to reference guide for a full range of financial professionals and students. It examines the behavioral and statistical causes of market momentum while also exploring the practical side of implementing related strategies. The phenomenon of momentum in finance occurs when past high returns are followed by subsequent high returns, and past low returns are followed by subsequent low returns. Market Momentum provides a detailed introduction to the financial topic, while examining existing literature. Recent academic and practitioner research is included, offering a more up-to-date perspective. What type of book is Market Momentum and how does it serve a range of readers’ interests and needs? A holistic market momentum guide for industry professionals, asset managers, risk managers, firm managers, plus hedge fund and commodity trading advisors Advanced text to help graduate students in finance, economics, and mathematics further develop their funds management skills Useful resource for financial practitioners who want to implement momentum trading strategies Reference book providing behavioral and statistical explanations for market momentum Due to claims that the phenomenon of momentum goes against the Efficient Markets Hypothesis, behavioral economists have studied the topic in-depth. However, many books published on the subject are written to provide advice on how to make money. In contrast, Market Momentum offers a comprehensive approach to the topic, which makes it a valuable resource for both investment professionals and higher-level finance students. The contributors address momentum theory and practice, while also offering trading strategies that practitioners can study.
Author: Afonso V. Januario
Publisher:
ISBN:
Category :
Languages : en
Pages : 53
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Book Description
This paper examines the performance of variables that have been suggested in the literature as being good predictors of the returns of value and momentum equity investment strategies out-of-sample. Using simple linear regression models with shrunk estimators at monthly and annual frequency, I find that, value is predicted by book-to-market, earnings-price ratio, smooth earning-price ratio (Asness et al. (2000) and Cohen et al. (2003)), book-to-market or dividend yield together with earnings price ratio growth, and by different forecast combinations. The results are not robust to leverage constraints (with the exception of lagged returns at monthly frequency) and do not hold for constant volatility portfolios. Momentum is predicted at monthly and annual frequency by book-to-market, at monthly frequency by lagged-one-month return, and at annual frequency by book-to-market together with earnings-price ratio growth. Results are robust to targeted volatility portfolios (Daniel et al. (2013)), but are not robust to leverage constraints, finer portfolios, or industry controls. All other predictors perform poorly, are unstable between sub-samples, and are not robust to various robustness tests. The results suggest links of value to the real economy and that the variety of predictors proposed by the literature are of little value for predicting momentum returns out-of-sample.
Author: Gary Antonacci
Publisher: McGraw Hill Professional
ISBN: 0071849459
Category : Business & Economics
Languages : en
Pages : 256
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Book Description
The investing strategy that famously generates higher returns with substantially reduced risk--presented by the investor who invented it "A treasure of well researched momentum-driven investing processes." Gregory L. Morris, Chief Technical Analyst and Chairman, Investment Committee of Stadion Money Management, LLC, and author of Investing with the Trend Dual Momentum Investing details the author’s own momentum investing method that combines U.S. stock, world stock, and aggregate bond indices--a formula proven to dramatically increase profits while lowering risk. Antonacci reveals how momentum investors could have achieved long-run returns nearly twice as high as the stock market over the past 40 years, while avoiding or minimizing bear market losses--and he provides the information and insight investors need to achieve such success going forward. His methodology is designed to pick up on major changes in relative strength and market trend. Gary Antonacci has over 30 years experience as an investment professional focusing on under exploited investment opportunities. In 1990, he founded Portfolio Management Consultants, which advises private and institutional investors on asset allocation, portfolio optimization, and advanced momentum strategies. He writes and runs the popular blog and website optimalmomentum.com. Antonacci earned his MBA at Harvard.
Author: Wesley R. Gray
Publisher: John Wiley & Sons
ISBN: 1118328078
Category : Business & Economics
Languages : en
Pages : 293
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Book Description
A must-read book on the quantitative value investment strategy Warren Buffett and Ed Thorp represent two spectrums of investing: one value driven, one quantitative. Where they align is in their belief that the market is beatable. This book seeks to take the best aspects of value investing and quantitative investing as disciplines and apply them to a completely unique approach to stock selection. Such an approach has several advantages over pure value or pure quantitative investing. This new investing strategy framed by the book is known as quantitative value, a superior, market-beating method to investing in stocks. Quantitative Value provides practical insights into an investment strategy that links the fundamental value investing philosophy of Warren Buffett with the quantitative value approach of Ed Thorp. It skillfully combines the best of Buffett and Ed Thorp—weaving their investment philosophies into a winning, market-beating investment strategy. First book to outline quantitative value strategies as they are practiced by actual market practitioners of the discipline Melds the probabilities and statistics used by quants such as Ed Thorp with the fundamental approaches to value investing as practiced by Warren Buffett and other leading value investors A companion Website contains supplementary material that allows you to learn in a hands-on fashion long after closing the book If you're looking to make the most of your time in today's markets, look no further than Quantitative Value.
Author:
Publisher:
ISBN:
Category :
Languages : en
Pages : 134
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Book Description
Author: Emilio Barucci
Publisher: Springer Science & Business Media
ISBN: 1447100891
Category : Business & Economics
Languages : en
Pages : 473
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Book Description
A presentation of classical asset pricing theory, this textbook is the only one to address the economic foundations of financial markets theory from a mathematically rigorous standpoint and to offer a self-contained critical discussion based on empirical results. Tools for understanding the economic analysis are provided, and mathematical models are presented in discrete time/finite state space for simplicity. Examples and exercises included.
Author: Michael E. Edleson
Publisher: John Wiley & Sons
ISBN: 1118044746
Category : Business & Economics
Languages : en
Pages : 263
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Book Description
Michael Edleson first introduced his concept of value averaging to the world in an article written in 1988. He then wrote a book entitled Value Averaging in 1993, which has been nearly impossible to find—until now. With the reintroduction of Value Averaging, you now have access to a strategy that can help you accumulate wealth, increase your investment returns, and achieve your financial goals.
