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by Jack R. Vogel, Wesley R. Gray
Quantitative Momentum
Title Page
Copyright
Dedication
Preface
Acknowledgments
About the Authors
Part One: Understanding Momentum
Chapter 1: Less Religion; More Reason
Technical Analysis: The Market's Oldest Religion
A New Religion Emerges: Fundamental Analysis
The Age of Evidence-Based Investing
Don't Worry: This Book Is About Stock-Selection Momentum
Summary
Notes
Chapter 2: Why Can Active Investment Strategies Work?
Into the Lion's Den
Good Investing Is Like Good Poker: Pick the Right Table
Growth Investing Stinks, So Why Do It?
Summary
Notes
Chapter 3: Momentum Investing Is Not Growth Investing
The Efficient Market Mafia Kills Relative Strength
“Momentum” Rises from the Ashes
Behavioral Finance Theorists Explain Momentum
Wait a Minute: Momentum Investing Is Just Growth Investing, Which Doesn't Work!
Digging Deeper into Growth versus Momentum
But Why Does Momentum Work?
Summary
Notes
Chapter 4: Why All Value Investors Need Momentum
Momentum Is a Myth
Asness Separates Fact from Fiction
Expanding Your Horizons with Momentum
Marrying Value and Momentum
Summary
Notes
Part Two: Building a Momentum-Based Stock Selection Model
Chapter 5: The Basics of Building a Momentum Strategy
How to Calculate Generic Momentum
Three Types of Momentum
Why Momentum Portfolio Construction Matters
Summary
Notes
Chapter 6: Maximizing Momentum: The Path Matters
The Performance of Lottery Stocks
The Path to Momentum Profits
The Results
Summary
Notes
Chapter 7: Momentum Investors Need to Know Their Seasons
Window Dressing
Tax-Motivated Trading
Great Theories: But Why Do We Care?
Momentum Seasonality: The Results
Summary
Notes
Chapter 8: Quantitative Momentum Beats the Market
Transaction Costs
The Parameters of the Universe
Quantitative Momentum Analysis
A Peek Inside the Black Box
Beating the Market with Quantitative Momentum
Notes
Chapter 9: Making Momentum Work in Practice
A Two-Legged Stool: Value + Momentum
A Three-Legged Stool: Combo + Trend
Career Risk Considerations
What if I Can't Handle Poor Relative Performance?
Notes
Appendix A. Investigating Alternative Momentum Concepts
How is Momentum Related to Fundamentals?
Is the 52-Week High a Better Momentum Signal?
Can Absolute Strength Improve Relative Strength Momentum?
Can the Volatility of Momentum be Constrained?
Notes
Appendix B: Performance Statistics Definitions
About the Companion Website
Index
End User License Agreement
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Prev
Previous Chapter
Series Page
Next
Next Chapter
Title Page
Table of Contents
Title Page
Copyright
Dedication
Preface
Acknowledgments
About the Authors
Part One: Understanding Momentum
Chapter 1: Less Religion; More Reason
Technical Analysis: The Market's Oldest Religion
A New Religion Emerges: Fundamental Analysis
The Age of Evidence-Based Investing
Don't Worry: This Book Is About Stock-Selection Momentum
Summary
Notes
Chapter 2: Why Can Active Investment Strategies Work?
Into the Lion's Den
Good Investing Is Like Good Poker: Pick the Right Table
Growth Investing Stinks, So Why Do It?
Summary
Notes
Chapter 3: Momentum Investing Is Not Growth Investing
The Efficient Market Mafia Kills Relative Strength
“Momentum” Rises from the Ashes
Behavioral Finance Theorists Explain Momentum
Wait a Minute: Momentum Investing Is Just Growth Investing, Which Doesn't Work!
Digging Deeper into Growth versus Momentum
But Why Does Momentum Work?
Summary
Notes
Chapter 4: Why All Value Investors Need Momentum
Momentum Is a Myth
Asness Separates Fact from Fiction
Expanding Your Horizons with Momentum
Marrying Value and Momentum
Summary
Notes
Part Two: Building a Momentum-Based Stock Selection Model
Chapter 5: The Basics of Building a Momentum Strategy
How to Calculate Generic Momentum
Three Types of Momentum
Why Momentum Portfolio Construction Matters
Summary
Notes
Chapter 6: Maximizing Momentum: The Path Matters
The Performance of Lottery Stocks
The Path to Momentum Profits
The Results
Summary
Notes
Chapter 7: Momentum Investors Need to Know Their Seasons
Window Dressing
Tax-Motivated Trading
Great Theories: But Why Do We Care?
Momentum Seasonality: The Results
Summary
Notes
Chapter 8: Quantitative Momentum Beats the Market
Transaction Costs
The Parameters of the Universe
Quantitative Momentum Analysis
A Peek Inside the Black Box
Beating the Market with Quantitative Momentum
Notes
Chapter 9: Making Momentum Work in Practice
A Two-Legged Stool: Value + Momentum
A Three-Legged Stool: Combo + Trend
Career Risk Considerations
What if I Can't Handle Poor Relative Performance?
Notes
Appendix A. Investigating Alternative Momentum Concepts
How is Momentum Related to Fundamentals?
Is the 52-Week High a Better Momentum Signal?
Can Absolute Strength Improve Relative Strength Momentum?
Can the Volatility of Momentum be Constrained?
Notes
Appendix B: Performance Statistics Definitions
About the Companion Website
Index
End User License Agreement
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Guide
Table of Contents
Begin Reading
List of Illustrations
Chapter 2: Why Can Active Investment Strategies Work?
Figure 2.1 The Two Pillars of Behavioral Finance
Figure 2.2 Identifying Opportunity in the Market
Figure 2.3 CGM Focus Fund from 1999 to 2009
Figure 2.4 The Long-Term Performance Equation
Figure 2.5 Investors Extrapolate Past Growth Rates into the Future
Figure 2.6 Realized Growth Rates Systematically Mean-Revert
Figure 2.7 Value Investing Can Underperform
Figure 2.8 Value and Growth Chart
Figure 2.9 New Style Box Paradigm
Chapter 3: Momentum Investing Is Not Growth Investing
Figure 3.1 CAGR: Growth Monkeys versus Momentum Monkeys
Figure 3.2 Volatility: Growth Monkeys versus Momentum Monkeys
Figure 3.3 Drawdown: Growth Monkeys versus Momentum Monkeys
Chapter 4: Why All Value Investors Need Momentum
Figure 4.1 Modern Portfolio Theory Chart (1927-2014)
Figure 4.2 Modern Portfolio Theory with Momentum
Figure 4.3 US Rolling Five-Year Spreads
Figure 4.4 UK Rolling Five-Year Spreads
Figure 4.5 Europe Rolling Five-Year Spreads
Figure 4.6 Japan Rolling Five-Year Spreads
Figure 4.7 Global Rolling Five-Year Spreads
Chapter 5: The Basics of Building a Momentum Strategy
Figure 5.1 Short-Term Momentum Portfolio Returns
Figure 5.2 Long-Term Momentum Portfolio Returns
Figure 5.3 Intermediate-Term Momentum Portfolio Returns
Chapter 6: Maximizing Momentum: The Path Matters
Figure 6.1 Alliance and International Rectifier Past Performance
Figure 6.2 Alliance and International Rectifier Future Performance
Figure 6.3 Frog-in-the-Pan Portfolio Alphas
Figure 6.4 Quality of Momentum Portfolio Returns
Chapter 7: Momentum Investors Need to Know Their Seasons
Figure 7.1 Momentum Seasonality from 1984 to 2004
Figure 7.2 Momentum Spread from 1974 to 2014
Chapter 8: Quantitative Momentum Beats the Market
Figure 8.1 Quantitative Momentum Process
Figure 8.2 Cumulative Value for Quantitative Momentum (1927–2014)
Figure 8.3a Five-Year Rolling CAGR for Quantitative Momentum
Figure 8.3b Ten-Year Rolling CAGR for Quantitative Momentum
Figure 8.4 Summary Drawdown Analysis
Figure 8.5a Five-Year Rolling Max Drawdown for Quantitative Momentum
Figure 8.5b Ten-Year Rolling Max Drawdown for Quantitative Momentum
Figure 8.6 Market Cycle Performance for Quantitative Momentum
Figure 8.7 Short-Term Stress Event Tests for Quantitative Momentum
Figure 8.8a Five-Year Rolling Alpha for Quantitative Momentum
Figure 8.8b Ten-Year Rolling Alpha for Quantitative Momentum
Chapter 9: Making Momentum Work in Practice
Figure 9.1 Rolling Five-Year Spreads
Figure 9.2 Histogram of Five-Year Spreads
Figure 9.3 Histogram of 5-Year Spreads
Figure 9.4 Histogram of Five-Year Spreads
Appendix A. Investigating Alternative Momentum Concepts
Figure A1.1 Fundamental Momentum Returns
Figure A1.2 Decile Returns to 52-Week High Screen
Figure A1.3 Absolute Momentum Breakpoints
Figure A1.4 Absolute Momentum Number of Firms
List of Tables
Chapter 2: Why Can Active Investment Strategies Work?
Table 2.1 Value versus Growth (1927 to 2014)
Table 2.2 Value Investing Can Underperform (1994–1999)
Table 2.3 Annual Returns
Table 2.4 Summary Statistics (2000–2014)
Table 2.5 Summary Statistics (1994–2014)
Table 2.6 Combining Value and Growth Lowers Volatility (1994–1999)
Table 2.7 Annual Returns for Combo Portfolio
Table 2.8 Combining Value and Growth Lowers Volatility (1994–2014)
Chapter 3: Momentum Investing Is Not Growth Investing
Table 3.1 Momentum Performance (1927–2014)
Table 3.2 Momentum Investing Can Underperform (2008–2009)
Table 3.3 Momentum Investing Can Underperform (2008–2014)
Chapter 4: Why All Value Investors Need Momentum
Table 4.1 Japanese Equity Market Performance (1982–2014)
Table 4.2 Asset Class Historical Results (1927-2014)
Table 4.3 Momentum Performance (1982–2014)
Table 4.4 Value Performance (1982–2014)
Table 4.5 Correlation of Value and Momentum
Table 4.6 Value and Momentum Combination Portfolios
Chapter 5: The Basics of Building a Momentum Strategy
Table 5.1 Simple 12-Month Momentum Example for Apple
Table 5.2 Short-Term Momentum Portfolio Returns (1927–2014)
Table 5.3 Long-Term Momentum Portfolio Returns (1931–2014)
Table 5.4 Intermediate-Term Momentum Portfolio Returns (1927–2014)
Table 5.5 Momentum Portfolio Returns: Varying Holding Period and Number of Firms in the Portfolio (1927–2014)
Chapter 6: Maximizing Momentum: The Path Matters
Table 6.1 Lottery Stock Results
Table 6.2 Average Monthly Returns Sorting Stocks on Beta and the “Lottery” Ranking
Table 6.3 Frog-in-the-pan Results to Long/Short Momentum Portfolios
Table 6.4 Quality of Momentum Portfolio Annual Results
Chapter 7: Momentum Investors Need to Know Their Seasons
Table 7.1 Average Returns by Month
Table 7.2 Seasonality of Momentum Portfolio Annual Results
Chapter 8: Quantitative Momentum Beats the Market
Table 8.1 Universe Selection Parameters
Table 8.2 VW Quantitative Momentum Performance (1927–2014)
Table 8.3 CAGR Across Different Decades
Table 8.4 Top 10 Drawdown Analysis
Table 8.5 Market Cycle Definitions
Table 8.6 Asset Pricing Coefficient Estimates for Quantitative Momentum
Table 8.7 December 31, 2014, Quantitative Momentum Portfolio Holdings
Chapter 9: Making Momentum Work in Practice
Table 9.1 Combining Quantitative Value and Quantitative Momentum
Table 9.2 Combining Quantitative Value and Quantitative Momentum
Table 9.3 Core-Satellite Returns
Appendix A. Investigating Alternative Momentum Concepts
Table A1.1 Top Decile Portfolio Summary Statistics
Table A1.2 Bottom Decile Portfolio Summary Statistics
Table A1.3 Long/Short Momentum Portfolio Annual Returns
Table A1.4 Long/Short Momentum Portfolio Factor Loadings
Table A1.5 Value and Momentum Portfolio Annual Returns
Table A1.6 Absolute Momentum Long/Short Returns
Table A1.7 Absolute Momentum Long-Only Portfolio Returns
Table A1.8 Equal-Weighted Stop-Loss Momentum Monthly Returns
Table A1.9 Momentum Stop-Loss Performance
Table A1.10 Time-Series Momentum Performance
Appendix B: Performance Statistics Definitions
Table A2.1 Performance Statistics Definitions
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