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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Did you calculate the effective geometric rate of the 3 Month composite Portfolio, consisting the equally weighted Sub-Portfolios, Return? For every Month I sum up these two observations and take the Mean. So I think, considering your answer, that every Month i should just have the Returns of the Composite Portfolio, isn’t it?
Titan this the proper way to calculate the Returns of a Momentum Strategy? I want to duplicate their results.
This is the first observation of my Strategy. Thank you very much so far. 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.
Momentum Strategy Jegadeesh and Titman – Statalist
This method is simple, though perhaps not completely realistic or not to everybody’s taste other methods of calculation are also possible. It is momemtum while since I looked at this, so this is not a definite answer.
Jfgadeesh IIRC the method used in the paper is what you call vertical aggregation by month. Somehow my sell Returns are pretty high such that i just a Buy – Sell Return of 0, Quick Link to the paper Unfortunately the Method is poorly described: It was a short sale and the returns are due to falling stock prices.
Email Required, but never shown. In March, I calculate the Return of Tranche 1. But I don’t know which returns I have to calculate to implement my Momentum Strategy properly. 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.
I will check my notes later today and get back to you.
This continues every Month. It’s acutally a return as well. I work with discrete monthly Returns. I really would appreciate if you could check you notes! Post as a guest Name. You donlt want to use geometric averaging over 3 months, which will artificially decrease monthly volatility.
But I can also calculate the Return of the composite Portfolio vertical aggregation for the month March. Home Questions Tags Users Unanswered. Sign up or log in Sign up using Google.
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.