Tag: Momentum Investing

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Momentum
Alternative Investment Strategy

Why does momentum investing work?

Conventional wisdom says that it should be doomed once any stock-picking strategy nears “sure thing” status. If everyone knows the secret to vast riches, how could the strategy possibly work anymore? But there is a successful strategy that has been followed — and widely discussed — for decades, yet somehow persists as a relatively reliable […]

Alternative Investment Strategy

Risk-on- What happened to fears of 2018?

The equity reversal was tough on many trend-followers. This reversal spilled-over to US bonds during the month. Good buy trend signals now in both equities and bonds. Dollar strength reversed on Fed pause remarks. Metals and energy both moved higher during the month even with global growth threats. Commodities asset class is not a trend rich environment at this time.

Alternative Investment Strategy

Momentum is still a viable strategy – Look at the numbers

There has been a lot of discussion on the lack of success with momentum and trend-following strategies. There is little doubt that there has been greater dispersion in returns across managers. There have been winners and losers with disappointment focused on some larger high profile firms. 

 

Alternative Investment Strategy

Time Series or Cross Sectional Momentum – Which is Better? Your Choice May Matter

The marketplace is abuzz with the value of momentum trading, but a closer inspection shows that it is packaged in two major strains, time series and cross-sectional momentum. The traditional trend-following CTA focuses on time series momentum while the most of the equity research and implementation is conducted through the cross-sectional approach. There is similarity between these approaches, but there are also enough differences so that the return profile for each will not be the same. 

Alternative Investment Strategy

Can Momentum and Diversifications Solve Every Investment Problem?

I listened to a number of presentations concerning crisis alpha and crisis offset at a recent hedge fund conference. The idea of holding assets and strategies that will do well in “bad times” is a critical issue for any portfolio construction discussion. It is the bedrock and foundation of any portfolio that attempts to protect against bad states of nature, control risk, and gain during good times.

Alternative Investment Strategy

Momentum as the Big Embarrassment to Market Efficiency

“Momentum is a big embarrassment for market efficiency,” he proclaimed, saying he “hopes it goes away” and that the concept was “not exploitable.” – Eugene Fama from CFA Society of Chicago keynote speech. “Never let the truth get in the way of a good story.”― Mark Twain. You cannot help but think about Thomas Kuhn […]

Managed Futures

To Adjust or Not Adjust Volatility for Momentum Strategies

Risk management has taken the money management business by storm. If you run money, you have to say that you control volatility and manage the risk. It is the equivalent of saying, “I love my mother and apple pie.” If risk goes up, you have to cut position exposure or at least that is what many will say is the path to good returns. Nevertheless, the empirical testing of this truism could be improved. A recent paper in the Journal of Alternative Investments called, “Volatility Weighting Applied to Momentum Strategies” looks at this important question in detail and concludes that it does help at improving the return to risk.

Commodities

Momentum in Futures Not Spot – Hidden in the Basis?

Momentum strategies work with commodity futures, but a closer examination shows that the same momentum strategies are ineffective with commodity spot prices. This result, that the cash price action is not mirrored in the futures prices, seems odd. Of course, the futures are expectational markets, but the cross-sectional behavior in the spot should be represented […]