Implementing a Systematic Long-only Momentum Strategy: Evidence From India

26 Pages Posted: 8 Jan 2020

Date Written: October 24, 2019

Abstract

We show that a monthly-rebalanced, long-only portfolio of top-decile stocks selected from the NIFTY100 using `off-the-shelf' momentum criteria significantly outperforms the NIFTY100 Index - both in terms of absolute returns (by 10.70% pa) and risk adjusted returns, with a mean turnover of 32.10% per month. We show that momentum persists in the near term but dissipates over time. We demonstrate that our long-only approach has a significant tilt to the momentum factor. We also show that time in the market rather than timing the market is important for momentum investing. The strategy has higher volatility and the occasional momentum crash. The strategy's out performance survives real-world implementation given the rise of discount brokers in India. In the absence of cheap ETFs to get exposure to momentum, the systematic long-only strategy from the most liquid part of the market using `off-the-shelf' criteria provides a practical, executable investment methodology that exposes an investor to momentum in the Indian market.

Keywords: Momentum, Factors, India, Investing, Quantitative, Systematic

JEL Classification: G1, G11, G14

Suggested Citation

Raju, Rajan and Chandrasekaran, Abhijit, Implementing a Systematic Long-only Momentum Strategy: Evidence From India (October 24, 2019). Available at SSRN: https://ssrn.com/abstract=3510433 or http://dx.doi.org/10.2139/ssrn.3510433

Rajan Raju (Contact Author)

Invespar Pte Ltd ( email )

Singapore

Abhijit Chandrasekaran

Invespar Pte Ltd ( email )

Singapore

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