Quantitative equity portfolio management strategy : a combination of fundamental value and risk-managed Momentum
Autor(a) principal: | |
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Data de Publicação: | 2016 |
Tipo de documento: | Dissertação |
Idioma: | eng |
Título da fonte: | Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
Texto Completo: | http://hdl.handle.net/10400.14/21439 |
Resumo: | This dissertation examines return predictability from B/M and Momentum for US stocks for the period 1970-2015. Particularly, it investigates whether a simple fundamental screening (F-Score) within the high B/M quintile helps separating winners (financially undistressed firms) from losers (financially distressed firms). Finally, it identifies whether a simple 50-50 combination of HML (High-Minus-Low) and risk-adjusted WML (Winners-Minus-Losers) portfolios generates significant abnormal returns (alpha) for the full sample and sub-sample periods. In accordance with the literature, Fama-MacBeth cross-sectional regressions reveal that Momentum and B/M offer significant and persistent return predictive ability. Conflicting with previous evidence (Piotroski 2000), no return predictability in the cross-section of firms is detected for the interaction term between the F-Score and B/M. Return improvements from conditioning the high B/M quintile on high F-Scores are reduced to the 1976-1996 sample period of Piotroski (2000). Contrary, the target volatility momentum adjustment (Barroso & Santa-Clara 2015) does yield significant risk-return improvements, duplicating the Sharpe-Ratio from the Raw WML portfolio, reducing the maximum drawdown and improving the third and fourth moments of the return distribution. The 50-50 HML and WML* (target vol-atility WML) portfolio strategy significantly outperforms the CRSP market-value weighted portfolio and the S&P500 from 1970-2015, although the outperformance was strongest from 1970-2000. Ultimately, both the pure HML - WML* and the HML_F-Score - WML* com-binations (50-50) generated highly statistically significant abnormal monthly returns of 0.8% when setting the Carhart Four-Factor Model as the relevant asset-pricing model benchmark. |
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Quantitative equity portfolio management strategy : a combination of fundamental value and risk-managed MomentumDomínio/Área Científica::Ciências Sociais::Economia e GestãoThis dissertation examines return predictability from B/M and Momentum for US stocks for the period 1970-2015. Particularly, it investigates whether a simple fundamental screening (F-Score) within the high B/M quintile helps separating winners (financially undistressed firms) from losers (financially distressed firms). Finally, it identifies whether a simple 50-50 combination of HML (High-Minus-Low) and risk-adjusted WML (Winners-Minus-Losers) portfolios generates significant abnormal returns (alpha) for the full sample and sub-sample periods. In accordance with the literature, Fama-MacBeth cross-sectional regressions reveal that Momentum and B/M offer significant and persistent return predictive ability. Conflicting with previous evidence (Piotroski 2000), no return predictability in the cross-section of firms is detected for the interaction term between the F-Score and B/M. Return improvements from conditioning the high B/M quintile on high F-Scores are reduced to the 1976-1996 sample period of Piotroski (2000). Contrary, the target volatility momentum adjustment (Barroso & Santa-Clara 2015) does yield significant risk-return improvements, duplicating the Sharpe-Ratio from the Raw WML portfolio, reducing the maximum drawdown and improving the third and fourth moments of the return distribution. The 50-50 HML and WML* (target vol-atility WML) portfolio strategy significantly outperforms the CRSP market-value weighted portfolio and the S&P500 from 1970-2015, although the outperformance was strongest from 1970-2000. Ultimately, both the pure HML - WML* and the HML_F-Score - WML* com-binations (50-50) generated highly statistically significant abnormal monthly returns of 0.8% when setting the Carhart Four-Factor Model as the relevant asset-pricing model benchmark.Èsta tese analisa a previsibilidade de retornos de ações através de B/M e Momentum nos EUA no período 1970-2015. Particularmente, investiga se uma estratégia de triagem por da-dos fundamentais (F-Score; Piotroski 2000) no quintil B/M superior contribui a separar ações de empresas com balanços financeiros sólidos (‘Winners’) de empresas com balanços finan-ceiros fracos (‘Losers’). Finalmente, a tese identifica se uma estratégia simples de uma com-binação 50-50 de portfólios de HML (High-Minus-Low) e WML (Winners-Minus-Losers) com ajustamento de risco genera um retorno anormal (alpha). De acordo com a literatura, regressões de Fama-MacBeth revelam que Momentum e B/M possuem capacidade signifi-cativa e persistente de previsões de retornos. Em contraste com Piotroski (2000), não conse-gue-se identificar previsibilidade significativa de retornos na cross-section de ações em relação á interação entre o F-Score e B/M. Ganáncias de triagens por F-Score no quintil B/M superior reduzem-se ao período da amostra original de Piotroski (2000). Pelo contrário, o ajustamento de WML á volatilidade constante (Barroso & Santa-Clara 2015) produz melhorias significantes de retorno e risco: duplica o Sharpe-Ratio da WML simples, reduz a perda máxima num mes, e melhora os terceiros e quartos momentos da distribuição de retor-nos mensuais. A estratégia 50-50 HML e WML* (ajustado por volatilidade) supera signifi-cativamente os retornos dos portfólios de mercado CRSP e S&P500 de 1970 á 2015, mesmo que o melhor desempenho tivesse tido lugar entre 1970-2000. Finalmente, tanto a com-binação HML-WML* quanto a combinação HML_F-Score-WML* generaram retornos anormais de 0.8% por més (altamente significativos) em relação ao Carhart Four-Factor Model.Guedes, José Filipe Garcia CorrêaVeritati - Repositório Institucional da Universidade Católica PortuguesaDey, Thomas2017-01-31T10:00:15Z2016-10-2720162016-10-27T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/masterThesisapplication/pdfhttp://hdl.handle.net/10400.14/21439TID:201284014enginfo:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-07-12T17:27:28Zoai:repositorio.ucp.pt:10400.14/21439Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-19T18:17:44.633789Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse |
dc.title.none.fl_str_mv |
Quantitative equity portfolio management strategy : a combination of fundamental value and risk-managed Momentum |
title |
Quantitative equity portfolio management strategy : a combination of fundamental value and risk-managed Momentum |
spellingShingle |
Quantitative equity portfolio management strategy : a combination of fundamental value and risk-managed Momentum Dey, Thomas Domínio/Área Científica::Ciências Sociais::Economia e Gestão |
title_short |
Quantitative equity portfolio management strategy : a combination of fundamental value and risk-managed Momentum |
title_full |
Quantitative equity portfolio management strategy : a combination of fundamental value and risk-managed Momentum |
title_fullStr |
Quantitative equity portfolio management strategy : a combination of fundamental value and risk-managed Momentum |
title_full_unstemmed |
Quantitative equity portfolio management strategy : a combination of fundamental value and risk-managed Momentum |
title_sort |
Quantitative equity portfolio management strategy : a combination of fundamental value and risk-managed Momentum |
author |
Dey, Thomas |
author_facet |
Dey, Thomas |
author_role |
author |
dc.contributor.none.fl_str_mv |
Guedes, José Filipe Garcia Corrêa Veritati - Repositório Institucional da Universidade Católica Portuguesa |
dc.contributor.author.fl_str_mv |
Dey, Thomas |
dc.subject.por.fl_str_mv |
Domínio/Área Científica::Ciências Sociais::Economia e Gestão |
topic |
Domínio/Área Científica::Ciências Sociais::Economia e Gestão |
description |
This dissertation examines return predictability from B/M and Momentum for US stocks for the period 1970-2015. Particularly, it investigates whether a simple fundamental screening (F-Score) within the high B/M quintile helps separating winners (financially undistressed firms) from losers (financially distressed firms). Finally, it identifies whether a simple 50-50 combination of HML (High-Minus-Low) and risk-adjusted WML (Winners-Minus-Losers) portfolios generates significant abnormal returns (alpha) for the full sample and sub-sample periods. In accordance with the literature, Fama-MacBeth cross-sectional regressions reveal that Momentum and B/M offer significant and persistent return predictive ability. Conflicting with previous evidence (Piotroski 2000), no return predictability in the cross-section of firms is detected for the interaction term between the F-Score and B/M. Return improvements from conditioning the high B/M quintile on high F-Scores are reduced to the 1976-1996 sample period of Piotroski (2000). Contrary, the target volatility momentum adjustment (Barroso & Santa-Clara 2015) does yield significant risk-return improvements, duplicating the Sharpe-Ratio from the Raw WML portfolio, reducing the maximum drawdown and improving the third and fourth moments of the return distribution. The 50-50 HML and WML* (target vol-atility WML) portfolio strategy significantly outperforms the CRSP market-value weighted portfolio and the S&P500 from 1970-2015, although the outperformance was strongest from 1970-2000. Ultimately, both the pure HML - WML* and the HML_F-Score - WML* com-binations (50-50) generated highly statistically significant abnormal monthly returns of 0.8% when setting the Carhart Four-Factor Model as the relevant asset-pricing model benchmark. |
publishDate |
2016 |
dc.date.none.fl_str_mv |
2016-10-27 2016 2016-10-27T00:00:00Z 2017-01-31T10:00:15Z |
dc.type.status.fl_str_mv |
info:eu-repo/semantics/publishedVersion |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/masterThesis |
format |
masterThesis |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
http://hdl.handle.net/10400.14/21439 TID:201284014 |
url |
http://hdl.handle.net/10400.14/21439 |
identifier_str_mv |
TID:201284014 |
dc.language.iso.fl_str_mv |
eng |
language |
eng |
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info:eu-repo/semantics/openAccess |
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openAccess |
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application/pdf |
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Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
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