call for frequent trading and thus incur high transaction costs.
Tajaddini and Crack (2012), report profitability of long and short momentum strategies
to be 1 and 3% after considering the real transaction cost; t hey also indicate the decrease in profit for the last 5 years in the sample period.
Industry momentum strategy has an annualized Sharpe ratio of 0.56, and ranks third after net issuance and individual stock momentum strategies
This study examines several aspects of the momentum strategies
, such as profitability, risk-based explanation, and decomposition of the momentum profits.
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.
(2005) wrote a paper "Global Momentum Strategies
: A Portfolio Perspective".
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.