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. But I don’t know which returns I have to calculate to implement my Momentum Strategy properly. This continues every Month.

Sign up using Facebook. At the end I sum every Return of each Month up and take the mean of that to have the Monthly Returns of my actual Strategy. But I can also calculate the Return of the composite Portfolio vertical aggregation for the month March. Somehow my sell Returns are pretty high such that i just a Buy – Sell Return of 0, My attempt would be: Do you know why it is like that?


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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. Sign up using Email and Password.

Momentum Strategy Jegadeesh and Titman – Statalist

Quick Link to the paper Unfortunately the Method is poorly described: Or just the composite Portfolio Return in March? But IIRC the method used in the paper is what you call vertical aggregation by month. Did you calculate the effective geometric rate of the 3 Month composite Portfolio, consisting the equally weighted Sub-Portfolios, Return? I really would appreciate if you could check you notes!

You donlt want to use geometric averaging over 3 anr, which will artificially decrease monthly volatility. It’s acutally a return as well.

Home Questions Tags Users Unanswered. I want to implement a Momentum Strategy, followed by Jegadeesh and Titman with overlapping Portfolios.

Or do I just calculate composite Portfolio Returns? In Jegadeesh and Titman, and the papers that follow it, the monthly return to the strategy for the month of March is found by averaging the monthly return for Momenum 1 in March, the avg return for Tranche 2 in March and the monthly return for Tranche 3 in March. I will check my notes later today and get back to you. It is a while since I looked at this, so this is not a definite answer.


I would really appreciate your help! Post as a guest Name. Also other people here may have inputs in the meantime By using our site, you acknowledge that you have read and understand our Cookie PolicyPrivacy Policyand our Terms of Service. It was a short sale and momemtum returns are due to tirman stock prices. Thank you very much so far. I work with discrete monthly Returns. Sign up or log in Sign up using Google. This is the first observation of my Strategy. Post Your Answer Discard 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.

So I think, considering your answer, that every Month i should just have the Returns of the Composite Portfolio, isn’t it? Is this the proper way to calculate the Returns of a Momentum Strategy? In March, I calculate the Return of Tranche 1. But i dont get why we use Buy minus Sell here to measure the return of the strategy.