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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For every Month I sum up these two observations and take the Mean. It was a short sale and the returns are due to falling stock prices. At the end I sum every Return of each Month up and take the mean momentuj that to have the Monthly Returns of my actual Strategy.

This method is simple, though perhaps not completely realistic or not to everybody’s taste other methods of calculation are also possible.

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. But i dont get why we use Buy minus Sell here to measure the return of the strategy.


I work with discrete monthly Returns. Thank you very much so far. This continues every Month.

In Jegadeesh and Titman, and the mlmentum 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 Nad and the monthly return for Tranche 3 in March. 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

Did jegadeesg calculate the effective geometric rate of the 3 Month composite Portfolio, consisting the equally weighted Sub-Portfolios, Return?

Also other people here may have inputs in the meantime I really would appreciate if you could check you notes! Do you know why jegadeesb is like that? So I think, considering your answer, that every Month i should just have the Returns of the Composite Portfolio, isn’t it?

My attempt would be: Sign up using Email and Password. This is the first observation of my Strategy. But IIRC the method used in the paper is what you call vertical aggregation by month.

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Is this the proper way to calculate the Returns of a Momentum Strategy? This question comes up fairly often, there may be previous answers on this site.

I would really appreciate your help! Post as a guest Name.


It is a while since I looked at this, so this is not a definite answer. Or do I just calculate composite Portfolio Returns? Somehow my sell Returns are pretty high such that i just a Buy – Sell Return of 0, You donlt want to use geometric averaging over 3 months, which will artificially decrease monthly volatility.

Or just the composite Portfolio Return in March? Home Questions Tags Users Unanswered. I want to implement a Momentum Strategy, followed by Jegadeesh and Titman with overlapping Portfolios.

I will check my notes later today and get back to you.

Sign up using Facebook. Email Required, but never shown. I want to duplicate their results.

Sign up or log in Sign up using Google. It’s acutally a return as well. 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.