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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Do you know why it is like that? But I can also calculate the Return of the composite Portfolio vertical aggregation for the month March. My attempt would be: Post as a guest Name. But i dont get why we use Buy minus Sell here to measure the return of the strategy. In March, I calculate the Return of Tranche 1.

Momentum Strategy Jegadeesh and Titman – Statalist

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It is a while since I looked at this, so this is not a definite answer.

Or just the composite Portfolio Return in March? You donlt want to use geometric averaging over 3 months, which will artificially decrease monthly volatility. This question comes up fairly often, there may be previous answers on this site. 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!

But IIRC adn method used in the paper is what you call vertical aggregation by month. 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. Or do I just calculate composite Portfolio Returns? Also other people here may have inputs in the meantime I want to duplicate their results.

It’s acutally a return as well. It was a short sale and the returns are due to falling stock prices.

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For every Jegadeehs I sum up these two observations and take the Mean. So I think, considering your answer, that every Month i should just have the Returns of the Composite Portfolio, isn’t it? Sign up or log in Sign up using Google.


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. I will check my notes later today and get back to you. 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. Is this the proper way to calculate the Returns of a Momentum Strategy?


Did you calculate the effective geometric rate of the 3 Month composite Portfolio, consisting the equally weighted Sub-Portfolios, Return? Sign up using Facebook. But I don’t know which returns I have to calculate to implement my Momentum Strategy properly.

Email Required, but never shown. Momentym my sell Returns are pretty high such that i just a Buy – Sell Return of 0, I want to implement a Momentum Strategy, followed by Jegadeesh and Titman with overlapping Portfolios. I would really appreciate your help! Quick Link to the paper Unfortunately the Method is poorly described: This is the first observation of my Strategy.

I work with discrete monthly Returns. Home Questions Tags Users Jegaeesh.