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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As shown in the diagram Tranche 1 consists of those stocks bought at the end of December and held in Jan, Feb, Mar jegaddeesh so on for the other tranches. It’s acutally a return as well. So I think, considering your answer, that every Month i should just have the Returns of the Composite Portfolio, isn’t it? But IIRC the method used in the paper is what you call vertical aggregation by month.
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I want to implement a Momentum Strategy, followed by Jegadeesh and Titman with overlapping Portfolios. Do you know why it is like that?
In March, I calculate the Return of Tranche 1. It was a short sale and the returns are due to falling stock prices. 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 Tranche 2 in March and the monthly return for Tranche 3 in March.
Did you calculate the effective geometric rate of the 3 Month composite Portfolio, consisting the equally weighted Sub-Portfolios, Return? Thank you very much so far. I want to duplicate jomentum results. Also other people here may have inputs in the meantime But I don’t know which returns I have to calculate to implement my Momentum Strategy properly. For every Month I sum up these two observations and take the Mean.
It is a while since I looked at this, so this is not a definite answer. This method is simple, though perhaps not completely realistic or not to everybody’s taste other methods of calculation are also possible.
Quick Link to the paper Unfortunately the Method is poorly described: But i dont get why we use Buy minus Sell here to measure the return of the strategy. I would really momenyum your help!
Momentum Strategy Jegadeesh and Titman – Statalist
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I work with discrete monthly Returns.
Sign up using Email and Password. At the end I sum every Return of each Month up and take the mean of that to have the Monthly Returns of my actual Strategy. Is this the proper way to calculate the Returns of a Momentum Strategy?
Or just the composite Portfolio Return in March? I really would appreciate if you could check you notes! This is the first observation of my Strategy. This continues every Month.