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MOMENTUM STILL RELEVANT TODAY? Anthony NG anthonytyng@gmail.com 11 November 2016
None of the contents constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any securi...
https://blog.quantopian.com/a-professional-quant-equity-workflow/
MOMENTUM Cross-Sectional Momentum. Jegadeesh and Titman (1993) Rank the cross-section of stocks each month based on their ...
Value/Carry/Momentum FX/equity/commodity/interest rate Sharpe ratio, average 0.40 per asset class Maximum drawdowns 1.8x -...
Persistence in asset returns Buy assets that out-performed Sell assets that under-performed Negative auto-correlation for ...
Value/Carry/Momentum FX/equity/commodity/interest rate Sharpe ratio, average 0.45 per asset class Maximum drawdowns 2.4x -...
TIME-SERIES MOMENTUM* 58 liquid futures contracts 12-month time series momentum, 1-month holding period Sample period: 198...
TIME-SERIES MOMENTUM* Size each position to match ex ante annualized volatility of 40% * TOBIAS MOSKOWITZ, YAO HUA OOI AND...
TIME-SERIES MOMENTUM* Sharpe ratio > 1, 1985 - 2009 Sharpe ratio = 1.1, 1966 - 1985 MSCI World, Beta = 0.09 (t-stat, 1.89)...
TIME-SERIES MOMENTUM AND VOLATILITY SCALING* Without scaling by volatility, time series and a buy-and-hold strategy offer ...
OTHER LITERATURE* 48 currencies against USD Sample period: 1976 - 2010 Currency portfolio, long currencies with high past ...
DATA Futures returns - sourced from Bloomberg 9 developed countries index futures 24 commodities futures 13 bond futures 9...
SUMMARY STATISTICS Bond Annualized return: [0.44%, 5.96%] Annualized Volatility: [1.36%, 10.28%] Commodities Annualized re...
BENCHMARKS EQUITY - MSCI World equity index BOND - Barclay's Aggregate Bond Index COMMODITY - S&P GSCI Index SMB - Size HM...
REPLICATE MOP, SR = 1.65
REPLICATE MOP
REPLICATE MOP
REPLICATE MOP
BUY-AND-HOLD FACTOR ANALYSIS REPLICATE MOP
SUMMARY AND FUTURE RESEARCH Time series momentum is a viable alpha generating strategy Risk parity / volatility scaling Co...
Thankyou Pleasedon'thesitatetocontactusif youhaveanyquestions anthonytyng@gmail.com @algo_hunter
POST-2008
POST-2008
POST-2008
"Is Momentum Still Relevant for Today’s Markets?" by Anthony Ng, Senior Lecturer
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12 de nov de 2016

"Is Momentum Still Relevant for Today’s Markets?" by Anthony Ng, Senior Lecturer

Presented at QuantCon Singapore 2016, Quantopian's quantitative finance and algorithmic trading conference, November 11th.

Despite being ‘discovered’ over 20 years ago, there is still confusion on what a momentum strategy entails and people ‘invest in momentum’. There are two generally accepted definitions of momentum in academic literature. In the quantitative equity investment sphere, momentum is frequently referred to as across securities or assets (cross-sectional or relative) and typically traded in a long-short or hedged manner. In futures trading, momentum is often referred to the past return of the security (time-series) and normally traded in a directional fashion.

Following from the above, we conducted an analysis on the performance of a momentum strategy of different asset classes: equity, fixed income, futures, and currencies. The study showed that both types of momentum are prevalent and persistent across all asset classes. Furthermore, as the correlations between the two types of momentum strategies and amongst the asset classes are quite low, substantial diversification benefit can be derived by combining them.

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"Is Momentum Still Relevant for Today’s Markets?" by Anthony Ng, Senior Lecturer

  1. 1. MOMENTUM STILL RELEVANT TODAY? Anthony NG anthonytyng@gmail.com 11 November 2016
  2. 2. None of the contents constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services Past performance is no indicator of future performance Provided for informational purposes only All investments involve risk, including loss of principal. DISCLAIMER
  3. 3. https://blog.quantopian.com/a-professional-quant-equity-workflow/
  4. 4. MOMENTUM Cross-Sectional Momentum. Jegadeesh and Titman (1993) Rank the cross-section of stocks each month based on their return over the past 6 mths Form decile portfolios each month Time Series Momentum. Moskowitz, Ooi and Pedersen (2012) Takes long or short position on an asset by only looking back at its own performance during the formation period, and not based on its relative rank across a cross-section
  5. 5. Value/Carry/Momentum FX/equity/commodity/interest rate Sharpe ratio, average 0.40 per asset class Maximum drawdowns 1.8x - 3.1x volatility Positive skew for value and momentum Negative skew for carry Sharpe ratio 1.4 *BAZ, JAMIL AND GRANGER, NICOLAS M. AND HARVEY, CAMPBELL R. AND LE ROUX, NICOLAS AND RATTRAY, SANDY, DISSECTING INVESTMENT STRATEGIES IN THE CROSS SECTION AND TIME SERIES (DECEMBER 4, 2015). CROSS-SECTIONAL MOMENTUM*
  6. 6. Persistence in asset returns Buy assets that out-performed Sell assets that under-performed Negative auto-correlation for < 1-month and > 3-years Positive auto-correlation for 6-12 months Sample period: 1990 - 2015 *BAZ, JAMIL AND GRANGER, NICOLAS M. AND HARVEY, CAMPBELL R. AND LE ROUX, NICOLAS AND RATTRAY, SANDY, DISSECTING INVESTMENT STRATEGIES IN THE CROSS SECTION AND TIME SERIES (DECEMBER 4, 2015). CROSS-SECTIONAL MOMENTUM*
  7. 7. Value/Carry/Momentum FX/equity/commodity/interest rate Sharpe ratio, average 0.45 per asset class Maximum drawdowns 2.4x - 4.4x volatility Positive skew for value and momentum Negative skew for carry Sharpe ratio: 1.37 *BAZ, JAMIL AND GRANGER, NICOLAS M. AND HARVEY, CAMPBELL R. AND LE ROUX, NICOLAS AND RATTRAY, SANDY, DISSECTING INVESTMENT STRATEGIES IN THE CROSS SECTION AND TIME SERIES (DECEMBER 4, 2015). TIME-SERIES MOMENTUM*
  8. 8. TIME-SERIES MOMENTUM* 58 liquid futures contracts 12-month time series momentum, 1-month holding period Sample period: 1985 - 2009 Alpha 1.58% per month with respect to MSCI World Index, Fama-French (1993) and Carhart (1997) SML (Size), HML (Value) and UMD (Cross-Sectional Momentum) * TOBIAS MOSKOWITZ, YAO HUA OOI AND LASSE PEDERSEN, TIME SERIES MOMENTUM (2012)
  9. 9. TIME-SERIES MOMENTUM* Size each position to match ex ante annualized volatility of 40% * TOBIAS MOSKOWITZ, YAO HUA OOI AND LASSE PEDERSEN, TIME SERIES MOMENTUM (2012)
  10. 10. TIME-SERIES MOMENTUM* Sharpe ratio > 1, 1985 - 2009 Sharpe ratio = 1.1, 1966 - 1985 MSCI World, Beta = 0.09 (t-stat, 1.89) SMB, Beta =-0.05 (t-stat, -0.84) HML, Beta = -0.01 (t-stat, -0.21) UMD, Beta = 0.28 (t-stat, 6.78) Only significant with UMD (MOM), the cross-sectional momentum factor * TOBIAS MOSKOWITZ, YAO HUA OOI AND LASSE PEDERSEN, TIME SERIES MOMENTUM (2012)
  11. 11. TIME-SERIES MOMENTUM AND VOLATILITY SCALING* Without scaling by volatility, time series and a buy-and-hold strategy offer similar cumulative returns, and their alphas are not significantly different Cross-sectional momentum offers a higher alpha than unscaled (scaled) time series momentum * ABBY KIM, YIUMAN TSE, JOHN WALD, TIME SERIES MOMENTUM AND VOLATILITY SCALING (2016)
  12. 12. OTHER LITERATURE* 48 currencies against USD Sample period: 1976 - 2010 Currency portfolio, long currencies with high past excess returns ("winners") and short currencies with low past excess returns ("losers") 1-mth formation, 1-mth holding: SR = 0.95 12-mth formation, 1-mth holding: SR = 0.61 * LUKAS MENKHOFF, LUCIO SARNO, MAIK SCHMELING AND ANDREAS SCHRIMPF, CURRENCY MOMENTUM STRATEGIES (2012)
  13. 13. DATA Futures returns - sourced from Bloomberg 9 developed countries index futures 24 commodities futures 13 bond futures 9 currencies futures Jul 1959 - Oct 2016
  14. 14. SUMMARY STATISTICS Bond Annualized return: [0.44%, 5.96%] Annualized Volatility: [1.36%, 10.28%] Commodities Annualized return: [-5.52%, 20.16%] Annualized Volatility: [14.53%, 53.12%] Currencies Annualized return: [-0.01%, 6.28%] Annualized Volatility: [7.24%, 13.91%] Equities Annualized return: [-2.92%, 9.90%] Annualized volatility: [16.74%, 25.00%]
  15. 15. BENCHMARKS EQUITY - MSCI World equity index BOND - Barclay's Aggregate Bond Index COMMODITY - S&P GSCI Index SMB - Size HML - Value vs growth MOM - Cross sectional Momentum
  16. 16. REPLICATE MOP, SR = 1.65
  17. 17. REPLICATE MOP
  18. 18. REPLICATE MOP
  19. 19. REPLICATE MOP
  20. 20. BUY-AND-HOLD FACTOR ANALYSIS REPLICATE MOP
  21. 21. SUMMARY AND FUTURE RESEARCH Time series momentum is a viable alpha generating strategy Risk parity / volatility scaling Correlation with S&P 500, returns analysis Post-2008 Analysis Adding more futures as well as currencies
  22. 22. Thankyou Pleasedon'thesitatetocontactusif youhaveanyquestions anthonytyng@gmail.com @algo_hunter
  23. 23. POST-2008
  24. 24. POST-2008
  25. 25. POST-2008

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