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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Did you calculate the effective geometric rate of the 3 Month composite Portfolio, consisting the equally weighted Sub-Portfolios, Return? By using our site, you acknowledge that you have read and understand our Cookie JegadesehPrivacy Policyand our Terms of Service.

Momentum Strategy Jegadeesh and Titman – Statalist

Post as a guest Name. Sign up using Email and Password. Quick Link to the paper Unfortunately the Method is poorly described: This question comes up fairly often, there may be previous answers on this site. Email Required, but never shown. Do you know why it is like that? I work with discrete monthly Returns. At the end I sum every Return of each Month up and take the mean of momentu, to have the Monthly Returns of my actual Strategy.

Also other people here may have inputs in the meantime I would really appreciate your help!


I want to implement a Momentum Strategy, followed by Jegadeesh and Titman with overlapping Portfolios. But I don’t know which returns I have to calculate to implement my Momentum Strategy properly. Sign up or log in Sign up using Google. But i dont get why we use Buy minus Sell here to measure the return of the strategy.

This method is simple, though perhaps not completely realistic or not to everybody’s taste other methods of calculation are also possible. Home Questions Tags Users Unanswered. This continues every Month.

In Jegadeesh and Titman, momenutm the papers that follow it, the monthly return to the strategy for the month of March is found mimentum 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.

In March, I calculate the Return of Tranche 1. It’s acutally a return as well. Or just the composite Portfolio Return 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.

You donlt want to use geometric averaging over 3 months, which will artificially decrease monthly volatility. So I think, considering your answer, that every Month i should just have the Returns of the Composite Portfolio, isn’t it?

Somehow my sell Returns are pretty high such that i just a Buy – Sell Return of 0, It was a short sale and the returns are due to falling stock prices.


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For every Month I sum up these two observations and take the Mean. Thank you very much so far. I want to duplicate their results. 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.

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. My attempt would be: Or do I just calculate composite Portfolio Returns? But IIRC the method used in the paper is what you call vertical aggregation by month.

This is the first observation of my Strategy. I really would appreciate if you could check you notes! Is this the proper way to calculate the Returns of a Momentum Strategy? Sign up using Facebook.

But I can also calculate the Return of the composite Portfolio vertical aggregation for the month March.