Momentum investing

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Momentum Investing

An investment philosophy in which the investor buys (or short sells) securities that had been performing well over the previous three to 12 months and sells those that have been performing poorly over the same period. This is a form of short-term investing based on the underlying belief that trends generally continue for a long period of time. This belief is at odds with efficient markets theory, because momentum investing assumes that even inefficiently priced securities tend to remain inefficiently priced. Economists therefore disagree on whether momentum investing is a sound investment strategy. See also: Market momentum.

Momentum investing.

A momentum investor focuses on stocks that are rising in value on increasing daily volume, and avoids stocks that are falling in price or that are perceived to be undervalued.

The logic is that when a pattern of growth has been established, it will continue to gain momentum and the growth will continue. Momentum investing is essentially the opposite of contrarian investing.

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As for the paper, the structure is the following: in Section I we introduce the momentum strategies and briefly review the main contributions of the literature to the topic under analysis; in Section II we describe thoroughly the different approaches of momentum strategies tested; in Section III we test the option momentum strategies.
They looked at trading costs of both value and momentum strategies, and found previous studies had estimated trading costs far higher than they actually were.
The fact that fund managers employing algorithmic momentum strategies suffer occasional dramatic losses suggests these managers either cannot anticipate momentum crashes or lack the incentives to take actions to avoid crashes.
Hence, they considered time-series momentum strategies to be of greater importance than the cross-section momentums.
They found the existence of momentum effect in 5 out of 7 stock markets and they also reported that the momentum strategies are profitable in 5 markets.
As per Conrad and Kaul (1998), the profitability of momentum strategies is due to cross-sectional variation in expected returns rather than predictable time-series variation in security returns.
UNDP, as a development partner of the national government, aims to help the country on the Implementation, Monitoring and Evaluation of the proposed Programme of Cooperation 2012-2015 period, with the momentum strategies of technical assistance, mobilization of external resources and internal, the national capacity building and the promotion of South-South Cooperation.
For ranking periods over an up-market, they note that momentum strategies should tend to place a positive "market-beta bet" as the past relative winners should tend to have higher betas.
In the first section, I constructed the momentum strategies and for the selection of momentum strategies, 1 analysed the following techniques;
Figure 1 displays the cumulative returns to investing in the carry and momentum strategies and in the U.