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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By clicking “Post Your Answer”, you acknowledge that you have read our updated terms of serviceprivacy policy and cookie policyand that your continued use of the website is subject to these policies. So I think, considering your answer, that every Month i should just have the Returns of the Composite Portfolio, isn’t it?

But I can also calculate the Return of the composite Portfolio vertical momentym for the month March. tutman

But I don’t know which returns I have to calculate to implement my Momentum Strategy properly. My attempt would be: Sign up using Facebook. This is the first observation of my Strategy. I would really appreciate your help!

This continues every Month. By using our site, you acknowledge that you have read and understand our Cookie PolicyPrivacy Policyand tigman Terms of Service. Or just the composite Portfolio Return in March? At the end I sum every Return of each Month jefadeesh and take the mean of that to have the Monthly Returns of my actual Strategy.

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This question comes up fairly often, there may be previous answers on this site. You donlt want to use geometric averaging over 3 months, which will artificially decrease monthly volatility. Sign up or log in Sign up using Google.

Also other people here may have inputs in the meantime Email Required, but never shown. 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. Did you calculate the effective geometric rate of the 3 Month composite Portfolio, consisting the equally weighted Sub-Portfolios, Return?

I work with discrete monthly Returns. Post as a guest Name. I really would appreciate if you could check you jegadeeesh

Quick Link to the paper Unfortunately the Method is poorly described: Thank you very much so far. 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. But IIRC the method used in the paper is what you call vertical aggregation by month. It was a short sale and the returns are due to falling stock prices.

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Do you know why it is like that? I will check my notes later today and get back to you. But i dont get why we use Buy minus Sell here to measure the return of the strategy. In March, I calculate the Return of Tranche 1.

Momentum Strategy Jegadeesh and Titman – Statalist

Somehow my sell Returns are pretty high such that i just a Buy – Sell Return of 0, For every Month I sum up these two observations and take the Mean. Or do I just calculate composite Portfolio Returns? Post Your Answer Discard By clicking “Post Your Answer”, you acknowledge that you have read our updated terms of serviceprivacy policy and cookie policyand that your continued use of the website is subject to these policies.

Is this the proper way to calculate the Returns of a Momentum Strategy? Sign up using Email and Password.

Home Questions Tags Users Unanswered. This method is simple, though perhaps not completely realistic or not to everybody’s taste other methods of calculation are also possible. I want to duplicate their results.

It’s acutally a return as well. It is a while since I looked at this, so this is not a definite answer.

I want to implement a Momentum Strategy, followed by Jegadeesh and Titman with overlapping Portfolios.