Optimising Momentum Returns

Abstract

The paper reports on an investigation of various techniques to optimise momentum returns. Eight different processes are applied to share returns from five countries, using US dollars as the common currency. The aim is to determine whether one method is clearly superior to other algorithms in maximising the momentum returns. The Single Index model with adjusted beta is found to have the potential to increase returns for large-size stocks. The results are important from the perspectives of researchers and practitioners, showing how an anomaly can be further exploited by wisely allocating money to each stock of the portfolio.

Keywords: Momentum return, Portfolio optimisation

JEL Classification: G11, G15