Journal of Investment Management, Forthcoming
25 Pages Posted: 30 Jul 2014 Last revised: 29 Apr 2017
Date Written: March 23, 2015
This paper considers several popular portfolio implementation techniques that maximize exposure to value and/or momentum stocks while taking into account transaction costs. Our analysis of long-only strategies illustrates how a strategy that simultaneously incorporates both value and momentum outperforms a strategy that combines pure-play value and momentum portfolios that are formed independently. There are two advantages of the simultaneous strategy. The first is the reduction in transaction costs; the second is better utilization of unfavorable value and momentum information in a long-only portfolio. Our analysis also addresses the optimal way to combine the faster-moving momentum signal with the slower-moving value signal.
Keywords: Value, Momentum, Portfolio Construction, Transaction Costs
JEL Classification: G11, G12
Suggested Citation: Suggested Citation
Fisher, Gregg S. and Shah, Ronnie and Titman, Sheridan, Combining Value and Momentum (March 23, 2015). Journal of Investment Management, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2472936 or http://dx.doi.org/10.2139/ssrn.2472936