Finding simple strategies for high returns

• Autor(a) principal: Coelho, Francisco Nunes Pinto
• Data de Publicação: 2017
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10400.14/22119
• topic: Value; Momentum; Earnings Momentum; Acceleration; Investment strategies; Empirical finance; Aceleração; Estratégias de investimento; Domínio/Área Científica::Ciências Sociais::Economia e Gestão

My objective throughout this paper is to provide useful insights to investors on simple ways to obtain high return focusing on Value & Momentum strategies applied to the US Market. Opposite from most existing literature, we were not able to prove the existence of both Price and Earnings Momentum. However, we see that past returns are explanatory of future for the same stock, as predicted by Moskowitz, Ooi and Pederson (2012). We observe that Value yield positive and abnormal returns, confirming past literature. Nonetheless, both strategies seem to be underperforming as they are not able to efficiently distinguish between true and false winners and losers. In order to solve this problem, I double sorted Value & Momentum using financial ratios and short-term trend indicators (acceleration indexes). For Momentum, generally, double sorting was either slightly or ineffective at all. For Value, double sorting improved returns suggesting that Price Earnings and Price to Cash-flow add complementary information to each other. After Accelerating Value & Momentum, we were able to establish the most profitable returns. However, the best possible risk-adjusted solution is the one proposed by Asness, Moskowitz & Pedersen (2013): an equal-weighted combination of returns.