describing quantitative strategies-portfolio management under constraints

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1、Chapter8Describingquantitativestrategies8.1TimeseriesmomentumstrategiesTrend-followingormomentuminvestingisaboutbuyingassetswhosepriceisrisingandsellingassetswhosepriceisfalling.Cross-sectionalmomentumstrategiesinthreedimensions(time-series,cross-section,tradingfrequency),whicharethemaindriverof

2、commoditytradingadvisors(CTAs)(seeHurstetal.[2010]),wereextensivelystudiedandreportedtopresentstrongreturncontinuationpatternsacrossdifferentportfoliorebalancingfrequencieswithhighSharperatio(seeJegadeeshetal.[2001],Moskowitzetal.[2012],Baltasetal.[2012a]).Time-seriesmomentumreferstothetradingst

3、rategythatresultsfromtheaggregationofanumberofunivariatemomentumstrategiesonavolatility-adjustedbasis.Asopposedtothecross-sectioalmomentumstrategywhichisconstructedasalong-shortzero-costportfolioofsecuritieswiththebestandworstrelativeperformanceduringthelookbackperiod,theunivariatetime-seriesmom

4、entumstrategy(UTMS)reliesheavilyontheserialcorrelation/predictabilityoftheasset’sreturnseries.Moskowitzetal.[2012]foundstrongpositivepredictabilityfromasecurity’sownpastreturnsacrossthenearlyfivedozenfuturescontractsandseveralmajorassetclassesstudiedoverthelast25years.Theyfoundthatthepast12-month

5、excessreturnofeachinstrumentisapositivepredictorofitsfuturereturn.Thistimeseriesmomentumeffectpersistsforaboutayearbeforepartiallyreversing.Baltasetal.[2012a]showedthattime-seriesmomentumstrategieshavehighexplanatorypowerinthetime-seriesofCTAreturns.Theyfurtherdocumentedtheexistenceofstrongtime-

6、seriesmomentumeffectsacrossmonthly,weeklyanddailyfrequencies,andconfirmedthatstrategiesatdifferentfrequencieshavelowcorrelationbetweeneachother,capturingdistinctpatterns.Thisdependenceonstrongautocorrelationintheindividualreturnseriesofthecontractsposesasubstantialchallengetotherandomwalkhypothes

7、isandthemarketefficiencywhichwasexplainedbyrationalandbehaviouralfinance.Usingintradaydata,Baltasetal.[2012b]exploredtheprofitabilityoftime-seriesmomentumstrategiesfocusingonthemomentumtradingsignalsandonthevolatilityestimation