Objective research to aid investing decisions

Value Investing Strategy (Strategy Overview)

Allocations for March 2021 (Final)

Momentum Investing Strategy (Strategy Overview)

Allocations for March 2021 (Final)
1st ETF 2nd ETF 3rd ETF

Including Basis to Qualify Multi-class Intrinsic Momentum

| | Posted in: Fundamental Valuation, Momentum Investing

Does including a measure of asset valuation as a qualifier improve the performance of intrinsic (absolute or time series) momentum? In their October 2019 paper entitled "Carry and Time-Series Momentum: A Match Made in Heaven", Marat Molyboga, Junkai Qian and Chaohua He investigate modification of an intrinsic momentum strategy as applied to futures using the sign of the basis (difference between nearest and next-nearest futures prices) for four asset classes: equity indexes (12 series), fixed income (18 series), currencies (7 series) and commodities (28 series). Their benchmark intrinsic momentum strategy is long (short) assets with positive (negative) returns over the last 12 months, with either: (1) equal allocations to assets, or (2) dynamic allocations that each month target 40% annualized volatility for each contract series. The modified strategy limits long (short) positions to assets with positive (negative) prior-month basis. They account for frictions due to portfolio rebalancing and rolling of contracts using cost estimates from a prior study. They focus on Sharpe ratio to assess strategy performance. Using monthly returns for 65 relatively liquid futures contract series during January 1975 through December 2016, they find that:

Please or subscribe to continue reading...
Gain access to hundreds of premium articles, our momentum strategy, full RSS feeds, and more!  Learn more

Daily Email Updates
Filter Research
  • Research Categories (select one or more)