Posts Tagged ‘momentum

08
Mar
11

Finanzas 101: Modelar la volatilidad

El blog Quantitative Research and Trading propone una serie de posts sobre volatilidad y pricing de opciones. Asi mismo, linkea una presentación la cual vale la pena mirar.

En esta primera entrega ofrece algunos conceptos claves sobre volatilidad como este:

(…)

Mean Reversion vs. Momentum
A puzzling feature of much of the literature on volatility is that it tends to stress the mean-reverting behavior of volatility processes.  This appears to contradict the finding that volatility behaves as a reinforcing process, whose long-term serial autocorrelations create a tendency to trend.  This leads to one of the most important findings about asset processes in general, and volatility process in particular: i.e. that the assets processes are simultaneously trending and mean-reverting.  One way to understand this is to think of volatility, not as a single process, but as the superposition of two processes:  a long term process in the mean, which tends to reinforce and trend, around which there operates a second, transient process that has a tendency to produce short term spikes in volatility that decay very quickly.  In other words, a transient, mean reverting processes inter-linked with a momentum process in the mean.  The presentation discusses two-factor modeling concepts along these lines, and about which I will have more to say later.

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21
Sep
10

Paper: estrategias en mercados de frontera

Value and Momentum in Frontier Emerging Markets

Abstract:
We document the presence of economically and statistically significant value and momentum effects in the new emerging equity markets in the world, the so-called frontier emerging markets. We are the first to investigate the characteristics of individual stocks in these markets. Our unique data set consists of more than 1,400 stocks over the period 1997 to 2008 and covers 24 of the most liquid frontier emerging markets. Our results serve as out-of-sample evidence for the existence of value and momentum effects that have previously been reported for developed and emerging markets. Further, we provide empirical evidence that value and momentum strategies within frontier markets are negatively correlated, and are uncorrelated with the same value and momentum strategies in developed and emerging markets. Our mean-variance spanning tests indicate that investors who expand their investment opportunity set with value and momentum investment strategies based on stocks from frontier markets can significantly improve the efficiency of their investment portfolio.

Link al Paper

13
Sep
10

Paper: Paciencia y Finanzas

Patience and Finance

This paper considers the role of patience in decision-making, in particular financial decision-making. Patience is not static; it evolves. This paper brings together lessons from economics, history, psychology, neurology, sociology to assess patience and its implications for the evolution of economic and financial systems.

Link al Paper

27
May
10

Paper: Style Momentum

Cross-Asset Style Momentum

Abstract:
This paper reports significant momentum profits among style portfolios of multiple asset classes. Previous studies have demonstrated style momentum within equity markets. The findings of this paper reveal that style momentum is not merely an equity market phenomenon, but a cross-asset phenomenon. This paper also presents a new assessment of alternative theories of momentum. Using the framework previously established by Lewellen (2002), the results of this paper show that cross-asset style momentum profits are consistent with the underreaction hypothesis, but not with the excess comovement theory of Lewellen (2002) or the style investing theory of Barberis and Shleifer (2003).

Link al Paper

25
May
10

Paper: Análisis Técnico + Fundamentals

Technical, Fundamental, and Combined Information for Separating Winners from Losers

Abstract:
The main purpose of this paper is to use both fundamental and technical information to improve the technical momentum strategy. We examine how fundamental accounting information along with the technical information such as past returns and past trading volume data can be used by investors to separate momentum winners from losers. Previous research has shown that the technical momentum strategy based on the past winners and losers in terms of cumulative returns, generates significantly positive returns in the subsequent periods. This paper proposes a unified framework of incorporating the fundamental indicators FSCORE (Piotroski (2000)) and GSCORE (Mohanram (2005)) into the technical momentum strategy. We have developed three hypotheses to test whether combined momentum strategy outperform the technical momentum strategy or not. From the empirical results of these three hypotheses, we conclude that the combined momentum strategy outperforms technical momentum strategy by generating significantly larger returns for both growth and value stocks.

Link al Paper

24
Feb
10

Paper: Momentum y Deportes

Momentum and Sports Betting

Abstract:
I document that momentum trading strategies are significantly profitable in an intragame NBA sports betting market. The momentum profits appear to be the result of market underreaction to news, but I find no evidence that the underreaction is driven by the psychological biases that form the foundation of existing behavioral models of momentum. Together, my results suggest that new theories of momentum might be needed.

Link al Paper

19
Feb
10

estrategia: ¿200 day moving average?

Wayne Whaley en un post en Traders.com se plantea testear las estrategias que siguen los movimientos de las medias móviles (50, 100, 200 dias), comparandolas contra la estrategia buy and hold, en un horizonte temporal de 40 años (1970-2009).

  • The 200-day moving average crossover rule is the most profitable of the seven moving averages (50, 100, 150, 200, 250, 300, 350) studied for the 40-year time period selected on the S&P 500. This may explain the popularity of the 200-day moving average.
  • None of the moving average strategies were profitable on the short side. This is because the S&P 500 has a positive bias during this time frame.
  • None of the moving average strategies yielded more than the 11.5% return obtained with the buy & hold plus dividends strategy.



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"It is hard to be finite upon an infinite subject, and all subjects are infinite." Herman Melville

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