Momentum strategies as a private investor

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fabian
Posts: 6
Joined: Wed Feb 02, 2022 7:34 am

Momentum strategies as a private investor

Post by fabian »

Hello, everyone! This is my first post and I look forward to participating in the forum!

I have a question, and hope to find an answer here: I like to invest in a fund or ETF that invests itself according to the momentum strategies described in the paper by Jegadeesh and Titman, i.e. investing into stock with recent strong performance and going short on stocks with recent weak performance.

While various products contain "Momentum" in the product name (for example, the Vanguard U.S. Momentum Factor ETF), these products commonly only invest into stocks with recent appreciation. Is there a mutual fund or etf (preferably by a large and well-established provider) available to private investors which implements both going long and short? I wonder if short selling is considered too risky as part of an ETF or mutual fund to be implemented?
Outer Marker
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Joined: Sun Mar 08, 2009 8:01 am

Re: Momentum strategies as a private investor

Post by Outer Marker »

Welcome to the forum. If that's really what you're looking for, you're probably in the wrong place. Suggest you read this and rethink your investing strategy. viewtopic.php?f=10&t=88005
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Mullins
Posts: 496
Joined: Wed May 08, 2019 4:38 pm

Re: Momentum strategies as a private investor

Post by Mullins »

Not the investing style this forum is famous for. But I'll tell you this. Funds and ETFs based on funds aren't sufficiently volatile enough to make it worth working with momentum strategies. You'd be better off using individual stocks -- and that's if your strategy succeeds.
"The Quality of the Answer Depends on the Quality of Your Question."
bberris
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Re: Momentum strategies as a private investor

Post by bberris »

I think the OP is looking for momentum ETFs, like MTUM. As I understand it, he is not looking to find ETFs with the greatest momentum. I don't think this is outside the boglehead realm, except for the most orthodox sect. These are index funds in the sense that the portfolio selection is automatic by criteria rather than by fundamental analysis. But I'm not familiar with any that use short momentum.

Momentum in stock prices is real and does increase returns, but maybe not risk-adjusted returns. The word is a little loaded because it implies a physics phenomenon, and it is obviously not what is operating in the markets.
alex_686
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Re: Momentum strategies as a private investor

Post by alex_686 »

bberris wrote: Thu Feb 03, 2022 1:19 pm I think the OP is looking for momentum ETFs, like MTUM. As I understand it, he is not looking to find ETFs with the greatest momentum. I don't think this is outside the boglehead realm, except for the most orthodox sect.
I don't think so. I think he is looking for a 130/30 fund. A fund that is invested 130% is the stocks with the highest momentum and shorting 30% that have the least momentum.

I can't think of any solid theorical reasons on why should do this. Please educate me.

That being said I don't think the OP is going to find any passive funds that are going to do that. This sounds like a strategy that is better suited for a active investor.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
jjj_22
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Joined: Sun Dec 08, 2019 2:07 pm

Re: Momentum strategies as a private investor

Post by jjj_22 »

There are some momentum ETFs out there but I think they're all long.

Most factor investors, around here anyway (though even among the minority of factor folks here, momentum is not very popular), are content with the long-only funds, despite a lot of the research focusing on on long-short portfolios.
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