Reward-risk momentum strategies using classical tempered stable distribution

Choi, Jaehyung; Kim, Young S.; Mitov, Ivan

doi:10.1016/j.jbankfin.2015.05.002

Cited by 23 publications

(17 citation statements)

References 53 publications

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“…Similarly, Novy‐Marx (2012) reported significant intermediate‐term (in a term between 7 and 12 months) momentum returns that were consistent in equity indices, currency and commodity markets. Choi, Kim, and Mitov (2015) employed various reward–risk measures (i.e. VaR, CVaR and Carhart's four factor model) and reported that momentum with lower volatility outperformed other traditional momentum strategies.…”

Section: Introductionmentioning

confidence: 99%

Is momentum trading profitable from Shari'ah compliant stocks?

Rashid

2016

Rev Financ Econ

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a b s t r a c t JEL classification: G10 G11 G12This research offers fresh evidence supporting the pervasiveness of the momentum effect. Two decades after the momentum profitability firstly documented by Jegadeesh and Titman (1993), yet little research has been specifically devised for the momentum profitability on Shari'ah compliant stocks. We assess the momentum profitability over the Shari'ah compliant stocks in a Malaysian setting. We find evidence of strong return persistence as far as toward four-year holding period. Interestingly, no significant momentum returns are found among the conventional stocks. Upon further exploration we find neither an industry-driven momentum effect nor the small size firms can account for the momentum returns. Using return persistency formation criteria, we further find that underreaction seems to well fit in explaining this unique long lasting momentum profitability.

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Section: Introductionmentioning

confidence: 99%

Is momentum trading profitable from Shari'ah compliant stocks?

Rashid

2016

Rev Financ Econ

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“…In addition, seasonal return patterns became clear. Previous studies, conducted for the German market by Nagler (1979) and Hanel (1991), referred equally to the superiority of the momentum strategy (see also Schiereck and Weber, 1995;Hirshleifer and Shumway, 2003; Barroso and Santa-Clara, 2015; Choi et al, 2015;Bohl et al, 2016).…”

Section: Scientific Discussion Of the Momentum Strategymentioning

confidence: 99%

Rolling Momentum Strategy: An Empirical Analysis

et al. 2021

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Research background: The focus of the momentum strategy, as a procyclical investment strategy, lies in the hypothesis that the winning shares of the past will most likely develop in the same direction in the near future. The same is assumed for the performance of the loser shares. The technical trading rules of relative strength according to Levy provide the basis for this approach (Levy, 1967). The momentum strategy can thus offer investors an opportunity to outperform the market. The creation of portfolios under the momentum strategy follows simple rules: On the basis of past prices, equities are selected within a formation period according to return criteria. The stocks with the highest and lowest returns on equities in the formation period are combined into winning and losing portfolios, each with the same number. The final step is the acquisition of the winning portfolio, which is held over the specified investment period, with the loser portfolio being sold short at the same time. The empirical analysis presented in this paper focuses on the success of the momentum strategy for the STOXX Europe 600 market over a formation and investment period of six months. Purpose of the article: The objective of this paper is to empirically test the above statements and assumptions. Portfolios are built up on a rolling basis over a period of six months and then observed with respect to their performance over a period from 1995 to 2000. The achieved returns are compared with a buy-and-hold strategy and empirically tested for return differences. Especially the years 2001, 2008, and 2020 as the crisis years of the dot-com bubble, the financial crisis, and the COVID-19 pandemic are focused on and discussed. Methods: The data of the period are examined for performance development in a database in the form of winner and loser portfolios. The returns are calculated as AR to a reference portfolio DAX. The returns are statistically tested for significant differences to a zero return using a t test. Findings & Value added: The results show the performance of the momentum strategy in the period from 1995 to 2000 for the stocks of the STOXX Europe 600. The strong fluctuations in the crisis years are notable. With few exceptions, the reference returns could only provide statistically non-significant results.

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“…To find out whether the FSCORE also affects the portfolios' crash risk exposures, we calculate the maximum drawdown (MDD) statistics for all 75 of the portfolios examined based on their month-end values. Similar to Choi et al (2015), MDD is defined as the maximum percentage loss over any subinterval of the evaluation period. Table 5 shows that MDD statistics are consistent with the return generation patterns reported for bearish periods (bearish months) with respect to the strongest impact of the FSCORE boost on average MDDs clearly being documented for the annually re-formed portfolios, among which the average MDD decreases from − 52.42 to − 45.31% as a consequence of including the high-FSCORE criterion alongside the primary criteria.…”

Section: Crash Risk Exposurementioning

confidence: 99%

Can the FSCORE add value to anomaly-based portfolios? A reality check in the German stock market

Pätäri

Leivo

Ahmed

2021

Financ Mark Portf Manag

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This paper examines the added value of using financial statement information, particularly that of Piotroski’s (J Account Res 38:1, 2000. https://doi.org/10.2307/2672906) FSCORE, for equity portfolio selection in the German stock market in a realistic research setting in which the critique against the implementability of FSCORE-based trading strategies is taken into account. We show that the performance of annually rebalanced long-only portfolios formed on any of the examined 12 accounting-based primary criteria improves by including the FSCORE as a supplementary criterion. Our study is the first to show that although the FSCORE boost is strongest for the 1-year holding period length, it also holds, on average, for the 3-year holding period. The use of a 3-year updating frequency is particularly beneficial for the low-accrual portfolio that—when supplemented with the high-FSCORE threshold—generates the best overall performance among all 75 portfolios examined. Moreover, we show that a high FSCORE is also an efficient stand-alone criterion for long-only portfolio formation.

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Reward-risk momentum strategies using classical tempered stable distribution

Cited by 23 publications

References 53 publications

Is momentum trading profitable from Shari'ah compliant stocks?

Is momentum trading profitable from Shari'ah compliant stocks?

Rolling Momentum Strategy: An Empirical Analysis

Can the FSCORE add value to anomaly-based portfolios? A reality check in the German stock market

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