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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But I don’t know which returns I have to calculate to implement my Momentum Strategy properly. This question comes up fairly often, there may be previous answers on this site. At the end I sum every Return of each Month up tihman take the mean of that to have the Monthly Returns of my actual Strategy.

Sign up or log in Sign up using Google. Or just the composite Portfolio Return in March? I want to implement a Momentum Strategy, followed by Jegadeesh and Titman with overlapping Portfolios. I want to duplicate their results.

I work with discrete monthly Returns. Sign up using Momentjm and Password. But IIRC the method used in the paper is what you call vertical aggregation by month.

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, Thank you very much jegadsesh far. But I can also calculate the Return of the composite Portfolio vertical aggregation for the month March. Did you calculate the effective geometric rate of the 3 Month composite Portfolio, consisting the equally weighted Sub-Portfolios, Return?


It’s acutally a return as well. 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 Tranche 1 in March, the avg return for Tranche 2 in March and the monthly return for Tranche 3 in March. My attempt would be: Jegadsesh every Month I sum up these two observations and take the Mean.

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In March, I calculate the Return of Tranche 1. This continues every Month. This method is simple, though perhaps not completely realistic or not to everybody’s taste other methods of calculation are also possible. I really would appreciate if you could check you notes!

Post as a guest Name. So I think, considering your answer, that every Month i should just have the Returns of momfntum Composite Portfolio, isn’t it?

Do you know why it is like that? Quick Link to the paper Unfortunately the Method is poorly described: By using our site, you acknowledge that you have read and understand our Cookie PolicyPrivacy Policyand our Terms of Service. But i dont get why we use Buy minus Sell here to measure the return of the strategy.


Also other people here may have inputs in the meantime Is this the proper way to calculate the Returns of a Momentum Strategy? It was a short sale and the returns are due to falling stock prices.


You donlt want to use geometric averaging over 3 months, which will artificially decrease monthly volatility. Mkmentum 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. 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. This is the first observation of my Strategy.

I would really appreciate your help! Email Required, but never shown.

Momentum Strategy Jegadeesh and Titman – Statalist

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