Title: Equity momentum strategies at work
Authors: Nalan Basturk - Maastricht University (Netherlands) [presenting]
Lennart Hoogerheide - VU University Amsterdam (Netherlands)
Herman van Dijk - Erasmus University Rotterdam (Netherlands)
Arco van Oord - De Nederlandse Bank (Netherlands)
Abstract: Exploiting momentum in a portfolio of stocks is shown to be a profitable strategy empirically. We explore the working of several momentum strategies and propose a set of mean-variance optimized portfolio strategies that incorporate the momentum properties of assets into account. We apply these strategies to monthly NYSE and AMEX common equity returns and evaluate the performance of these strategies based on their return and risk features. The proposed strategies outperform standard momentum particularly in terms of the Sharpe ratios and crash risk. In addition, a combination of the proposed strategies indicates further improvements in return and risk features and these improvements hold under moderate transaction costs.