Anyway, so I was flipping through WSC and when I came to Quant Currents, the first headline that caught my attention was "Dual Momentum". Basically it is a post from Gary Antonacci about his new paper - "Risk Premia Harvesting Through Dual Momentum".
I became a fan of Gary Antonacci work when I read his prior paper "Risk Premia Harvesting Through Momentum". I think the Risk Premia papers methodology will be more robust when compared to some of the other popular TAA and AAA papers.
One problem in general with popular papers on TAA and AAA is the reliance on volatility as a proxy for risk. To me, Volatility is NOT same as Risk. Volatility is just an up and down movement and is a good source of profits. Similarly I find volatility targeting though good, the performance differences seems to me is less to do with targeting and more to do with volatility harvesting. I feel there are other ways to do volatility harvesting while treating risk in absolute terms like draw down etc, % capital etc. How many customers decide to stay/leave a fund based on sharpe, volatility etc compared to absolute metrics like % of their capital loss or gain?
Coming back, following is an abstract of Gary Antonacci new paper. I will post my analysis and thoughts on the paper methodology in coming days. If you cannot wait, the link to full paper is at the end of the abstract.
Momentum is the premier market anomaly. It is nearly universal in its applicability. Rather than focus on momentum applied to particular assets or asset classes, this paper explores momentum with respect to what makes it most effective. We find absolute momentum to be more effective than relative momentum, but that combining the two gives the best results. We also explore the factor most rewarded by momentum - extreme past returns, i.e., price volatility. We identify high volatility through the risk premiums in foreign/U.S. equities, high yield/credit bonds, equity/mortgage REITs, and gold/Treasury bonds. Using modules of asset pairs as building blocks lets us isolate volatility related risk factors and benefit from cross-asset portfolio diversification while using a combination of relative and absolute momentum to capture risk premium profits.Link: Risk Premia Harvesting Through Dual Momentum
One of the first things traders learn (often hard way) is there is no absolute right and wrong approaches when it comes to profiting in markets. Please feel free to let me know your views. We learn more when our view differ. So the more our views differ the better.
Wish you all good health and good trading!
3 comments:
I'm just a simple daytrader and no quant at all, but looking at my stats over the years, I have traded about 3000 ticker symbols. Quite many. Looking at my P/L I have basically only made money in the low volatility tickers (measured on a relative basis).
BTW, nive to wake up with warm sun rays, I wake every morning with rain for the time being:(
Hi Oddmund,
Very interesting perspective. I am interested in learning bit more on your observation like on what type of setups (like Open range breakout?) do you notice this behavior and what could be the reason etc. May be you can do a post in future when you have time.
On side note, I think myself more as dabbler in quant stuff to satisfy intellectual curiosity.
Regards
Hi,
Yes, I'm going through my stats regularly, I might write about it if I find something worth mentioning.
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