In the paper they found a 12-month look-back period had the highest statistical significance (they tested look back periods from 1 to 48 months) when used with a one-month holding period.
Moskowitz, Yao Hua Ooi and Lasse Heje Pedersen which showed that absolute momentum profits were very consistent across 58 different asset classes and markets.
MOMENTUM DRAWDOWN SERIES
This was proven in a 2012 paper called Time Series Momentum by Tobias J. In the book Gary makes an important point that researchers have thoroughly looked at relative momentum but that they have ignored absolute momentum until recently.Īnd this in spite of the fact that absolute momentum often provides better results and has more flexibility than relative momentum. Similarly, it can also have positive absolute momentum if its trend has been positive (higher than short term bonds ) but negative relative momentum if another companies have gone up more. It is possible for a stock price to have positive relative momentum if it is strong relative to other companies and negative absolute momentum if its own trend has been down. If the train you are on starts going backwards and there are no other trains moving in the right direction, you step off on to the platform.”ĭual momentum combines relative and absolute momentumĭual momentum is the combination of relative and absolute momentum.
It is like being on a train, then hopping on to a faster one that comes along.Ībsolute momentum looks at an asset’s own positive excess return over a given time period. “ Relative momentum looks at price strength with respect to other assets. Gary explained absolute and relative momentum like this: Relative and absolute momentum differences If the stock price return minus the return of a short term government bond, called excess return, is greater than zero, then the company has positive absolute momentum. To find a company’s absolute momentum, you compare the movement of its stock price with the return of a short term government bond (in the book Gary uses US Treasury bills) over a certain period. Momentum, however, also works well on an absolute basis and it helps you reduce large losses. To calculate it you compare the movement of one company’s share price to the share price movements of other companies.īuying the most undervalued companies with the best relative momentum gives you market beating returns but it does not help you to reduce volatility (large up or down share price movements) or large falls in share prices. The type of momentum we found that works is called relative momentum. You can read more about all the best investment strategies we tested here: Quant-Investing best investment strategies. In fact it formed part of all the best investment strategies we tested. If you have read the research report Quantitative Value Investing in Europe: What Works for Achieving Alpha you know that (contrary to what we believed) we discovered that momentum works. In terms of investing momentum it means the movement of a company’s stock price which can be either up (positive momentum) or down (negative momentum). Momentum is based on the idea that a body in motion tends to stay in motion. You can read more about Gary on his website called Optimal Momentum.
These awards are given annually by the National Association of Active Investment Managers. His research on momentum won first place in 2012 and second place in 2011 of the prestigious Wagner Awards for Advances in Active Investment Management. Gary is an expert on the practical applications of momentum investing. This is similar to what we also here at Quant Investing. Gary has a Harvard MBA and over 35 years of experience researching, developing, and using investment strategies that have their basis in academic research.
Gary Antonacci is an interesting guy and has been around investing for a long time. If you found this article you have most likely read about dual momentum, the investment strategy described in the very interesting book by Gary Antonacci called Dual Momentum Investing: An Innovative Strategy for Higher Returns with Lower Risk.
0 kommentar(er)
