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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Quick Link to the paper Unfortunately the Method is poorly described: Or do I just calculate composite Portfolio Returns? My attempt would be: This method is simple, though perhaps not completely realistic or not to everybody’s taste other methods of calculation are also possible. I want to implement a Momentum Strategy, followed by Jegadeesh and Titman with overlapping Portfolios.

By using our site, you acknowledge that you have read and understand our Cookie PolicyPrivacy Policyand our Terms of Service. Email Required, but never shown. It’s mo,entum a return as well. In March, I calculate the Return of Tranche 1. I want to duplicate their results. Somehow my sell Returns are pretty high such that i just a Buy – Sell Return of 0, I would really appreciate your help!

Or just the composite Portfolio Return in March? It is a while since I looked at this, so this is not a definite answer. This continues every Month.


I work with discrete monthly Returns.

I will check my notes later today and get back to you. So I think, considering your answer, that every Month i should just have the Returns of the Composite Portfolio, isn’t it?


But I don’t know which returns I have to calculate to implement my Momentum Strategy properly. Do you know why it is like that? This question comes up fairly often, there may be previous answers on this site.

Post as a guest Name. Thank you very much so far.

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.

But i dont get why we use Buy minus Sell here to measure the return of the strategy. 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. Did you calculate the effective geometric rate of the 3 Month composite Portfolio, consisting the equally weighted Sub-Portfolios, Return? For every Month I sum up these two observations and take the Mean.

But I can also calculate the Return of the composite Portfolio vertical aggregation for the month March. Home Questions Tags Users Unanswered. Sign up or log in Sign up using Google. Sign up using Facebook. 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.


It was a short sale and the returns are due to falling stock prices. I really would appreciate if you could check you notes! Also other people here may have inputs in the meantime But IIRC the method used in the paper is what you call vertical aggregation by month. You donlt want to use geometric averaging over 3 months, which will artificially decrease monthly volatility.

Momentum Strategy Jegadeesh and Titman – Statalist

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. This is the first observation of my Strategy.

Sign up using Email and Password. 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.

Is this the proper way to calculate the Returns of a Momentum Strategy?