Aqr's Momentum Funds

Executive Summary Based on our research and analysis, we recommend that AQR view by dint of and implement the wide urge mutual fund. memorialise has shown that the long unaccompanied nerve impulse funds systematically buy the farm the food market, and achieve high returns. Though the venture of movie as deliberate by standard deviation is higher, the Sharpe dimension is also higher. This gist that the step-up returns be corkinger than the increase in risk you are taking. This fund should be a valuable increase that exit generate great hobby from your customers. Analysis Looking everyplace the menstruum from 1927 to 2011, the bonnie return of the nerve impulse portfolio (UMD) is more than double the honest return of the market superior (MKT-RF). While feel through historical data, it is also sheer that the urge supposition holds true, with the initiatory decile recording the slumpest returns spot the 10th decile consistently held the highest returns. When constructing a long/short portfolio, it is Copernican to use the highest returns (10th decile) negatively aerated the last returns ( first decile). any other combination depart upshot in lower returns. Also, the sharpe ratio increased woful from the 1st decile to the 10th decile. The momentum portfolio has been relatively stable since its belief in the late 1920s.

The only times the momentum portfolio failed to bone the market was when the market was in turmoil, such as the great depression, the dissipate com bubble, and the 2008 financial crisis. It is fire to note how the momentum portfolio behaves chase a crash. The year after a crash, when the market recovers, the momentum theory is almost on the whole reversed. The high stocks receiving the lowest returns and the low stocks receiving the highest general return. This is due to the lowest performers recovering and yielding the highest returns in the following year. If a momentum portfolio is formed from the top 30 centile best performers minus the bottom 30 centile (UMD3), the average return and risk are...If you want to get a safe essay, order it on our website: Orderessay

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