Combining Value and Momentum

Journal of Investment Management, Forthcoming

25 Pages Posted: 30 Jul 2014 Last revised: 29 Apr 2017

Gregg S. Fisher

Gerstein Fisher

Ronnie Shah

Deutsche Bank; University of Texas at Austin - Department of Finance

Sheridan Titman

University of Texas at Austin - Department of Finance; National Bureau of Economic Research (NBER)

Date Written: March 23, 2015

Abstract

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

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

Gregg S. Fisher

Gerstein Fisher ( email )

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HOME PAGE: http://www.gersteinfisher.com

Ronnie Shah (Contact Author)

Deutsche Bank ( email )

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New York, NY 10017
United States

HOME PAGE: http://www.db.com

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States

Sheridan Titman

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-232-2787 (Phone)
512-471-5073 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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