My question would be: What does one do during times when market momentum is minimal or undefined? I think you must decide quantitatively and objectively what does and does not constitute momentum before you can act upon it. I heard the two year comment, but that leaves a lot of time between when positive momentum ends and negative momentum is recognized.
No one can time well, that's why (which this professor didn't site), is that AQR and other quant firms have multistrategy funds. So, for your question, you have to make a diversified portfolio of the 3 main classic strategies : momentum, trend following and mean reversion. TF and MR (if long) do very badly during a market crash, but momentum wins a lot, and during that transition period after the crash, volatility mean reverts, so MR does well first and after a while TF. Of course AQR have many other strategies, like quant value, style factor exposure portfolios ..etc
@@abdobe7359 Hmm. Interesting. I have never heard of diversifying across strategies (rather than sectors or asset classes, etc.). Doesn't that virtually guarantee about the same return as long term buy and hold?
@@selftrue670 Yes, most quant funds have different funds, we can say that AQR is not nearly diversified as Citadel, 2Sigma or D.E Shaw taht adventure in new strategies/ innovation in AI and ML outside of the classic strats like TF, MR or momentum, stat arb, NAV in ETFs..etc. B&H is good as long as the investor can stomach -30%, -40% or more in DD, because it's about risk adjusted returns, not the absolute ones. That's why capital allocators, will allocate to you capital as a fund if you don't outperform the SP500, but you should have one or more of these : 1- Not be so far away from the market return, but have a lower annualized volatility. 2 - your fund has a very low or negative correlation to the market (allowing allocators to better diversify). 3 - your fund is specialized in a niche, especially if using new technology + new talents, to look for new ways of potentially generating alpha. Many investors still not interested in higher than the benchmark returns, because they don't want it's high vol and lose a lot during crashes (like 2020).
It's a really interesting video on Momentum. At the beginning of your video, you compare market momentum to the definition of momentum in physics. The formula for momentum is Mass x Velocity. What will be the analogy of mass and velocity for market or stock price momentum? Could you please publish the performance of your strategy for the period from 1936 to the end of 2018?
fanz fanz Momentum is more of a concept to illustrate that prices continue to move in the direction they have in the past. Here’s how I would relate to the physics definition: Mass = price Velocity = direction and rate of price change
We can go along with the physics definition. As momentum = mass x velocity. Here the velocity is the rate of rate of price. Similarly while talking in investment strategy, the mass can be considered as the percentage of stock allocation in a portfolio. So a momentum strategist’s portfolio momentum is the summation of each m x v.
Mass = gradient/ slope of the graph(price chart) in this case ur moving averages. Reason why it's very important to have MA's which move into the future. Velocity= volume/ time.
I am A little late to class, but it did not seem to me that using losers rather than winners worked very well with ETFs rather than stocks, after the dips of 2018 and 2020. Your perspective please?
I am impressed Professor. Especially regarding the reversing strategy. One key point would be to be able to figure out the entrance and egress points of such a strategy... I should come to work with you. :)
When you say the losers portfolio are you referring your self to the portfolio wherw you are short selling or to the losers in your portfolio. Correct me if I am wrong. Thanks
pages.stern.nyu.edu/~lpederse/papers/ValMomEverywhere.pdf
Link to Actual paper - value and momentum everywhere.
Thank you for sharing
Amazing lecture, great insight
Good lecture, thank you
based
So what if I combine value momentum? Say low price to some value but with momentum?
Absolutely brilliant.
Free Alpha. Thanks
My question would be: What does one do during times when market momentum is minimal or undefined? I think you must decide quantitatively and objectively what does and does not constitute momentum before you can act upon it. I heard the two year comment, but that leaves a lot of time between when positive momentum ends and negative momentum is recognized.
Just use some basic trend following, not that hard
No one can time well, that's why (which this professor didn't site), is that AQR and other quant firms have multistrategy funds. So, for your question, you have to make a diversified portfolio of the 3 main classic strategies : momentum, trend following and mean reversion. TF and MR (if long) do very badly during a market crash, but momentum wins a lot, and during that transition period after the crash, volatility mean reverts, so MR does well first and after a while TF.
Of course AQR have many other strategies, like quant value, style factor exposure portfolios ..etc
@@abdobe7359 Hmm. Interesting. I have never heard of diversifying across strategies (rather than sectors or asset classes, etc.). Doesn't that virtually guarantee about the same return as long term buy and hold?
@@selftrue670 Yes, most quant funds have different funds, we can say that AQR is not nearly diversified as Citadel, 2Sigma or D.E Shaw taht adventure in new strategies/ innovation in AI and ML outside of the classic strats like TF, MR or momentum, stat arb, NAV in ETFs..etc.
B&H is good as long as the investor can stomach -30%, -40% or more in DD, because it's about risk adjusted returns, not the absolute ones.
That's why capital allocators, will allocate to you capital as a fund if you don't outperform the SP500, but you should have one or more of these :
1- Not be so far away from the market return, but have a lower annualized volatility.
2 - your fund has a very low or negative correlation to the market (allowing allocators to better diversify).
3 - your fund is specialized in a niche, especially if using new technology + new talents, to look for new ways of potentially generating alpha.
Many investors still not interested in higher than the benchmark returns, because they don't want it's high vol and lose a lot during crashes (like 2020).
It's a really interesting video on Momentum. At the beginning of your video, you compare market momentum to the definition of momentum in physics. The formula for momentum is Mass x Velocity. What will be the analogy of mass and velocity for market or stock price momentum?
Could you please publish the performance of your strategy for the period from 1936 to the end of 2018?
fanz fanz
Momentum is more of a concept to illustrate that prices continue to move in the direction they have in the past. Here’s how I would relate to the physics definition:
Mass = price
Velocity = direction and rate of price change
He has answered at 6:38 please view the video again.
We can go along with the physics definition. As momentum = mass x velocity. Here the velocity is the rate of rate of price. Similarly while talking in investment strategy, the mass can be considered as the percentage of stock allocation in a portfolio. So a momentum strategist’s portfolio momentum is the summation of each m x v.
Mass = gradient/ slope of the graph(price chart) in this case ur moving averages. Reason why it's very important to have MA's which move into the future.
Velocity= volume/ time.
I am A little late to class, but it did not seem to me that using losers rather than winners worked very well with ETFs rather than stocks, after the dips of 2018 and 2020. Your perspective please?
I am impressed Professor. Especially regarding the reversing strategy. One key point would be to be able to figure out the entrance and egress points of such a strategy... I should come to work with you. :)
thanks kent
Volatility causes momentum...
A strategy would be useful.
When you say the losers portfolio are you referring your self to the portfolio wherw you are short selling or to the losers in your portfolio. Correct me if I am wrong. Thanks
Again. Bad video recording.
bro what do you mean video works awesome
He is an imposter