Momentum in the Indian Equity Markets: Positive Convexity and Positive Alpha

16 Pages Posted: 18 Mar 2019 Last revised: 23 Apr 2019

Date Written: February 1, 2019

Abstract

We present effective momentum strategies over the liquid equity futures market in India. We evaluate and determine the persistence of the returns at various look-backs ranging from quarterly and weekly to more granular look-backs. We look at a universe of the liquid equity instruments traded across the Indian markets to evaluate this anomaly. We evaluate momentum across the two datasets based on frequency - daily data and intraday bar data. On the daily scale we compare momentum with other style factors. In the intraday scale we evaluate time series momentum or absolute momentum and cross-sectional momentum or relative momentum. We demonstrate that at the optimal horizon, momentum strategies on securities in India can be a source of uncorrelated alpha. We use active risk-budgeting at a given target risk for portfolio construction. We will show in a separate publication how it outperforms mean-variance optimization.

Keywords: tactical asset allocation, time series momentum, quantitative portfolio management, asset pricing, futures pricing, international financial markets, market efficiency

JEL Classification: C630, G11, G12, G13, G14, G15, G120, F37

Suggested Citation

Srivastava, Sonam and Chakravorty, Gaurav and Singhal, Mansi, Momentum in the Indian Equity Markets: Positive Convexity and Positive Alpha (February 1, 2019). Available at SSRN: https://ssrn.com/abstract=3345280 or http://dx.doi.org/10.2139/ssrn.3345280

Sonam Srivastava

Wright Research ( email )

Mumbai, 400098
India

Gaurav Chakravorty (Contact Author)

Qplum ( email )

Harborside 5, 185 Hudson St, Suite 1620
Jersey City, NJ 07311
United States
2013772302 (Phone)

HOME PAGE: http://https://www.qplum.co

Mansi Singhal

Qplum ( email )

Harborside 5, 185 Hudson St, Suite 1620
Jersey City, NJ 07311
United States
2013772302 (Phone)

HOME PAGE: http://www.qplum.co

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