5: Momentum vs Random Entries
Contrasting the returns, MAEs, and risk-adj returns for small-cap equities
Can a momentum-based strategy beat random entries in small-cap stocks?
Let’s explore this question by considering a long-only momentum strategy that is invested when momentum is strong (short-term trend > long-term trend) and flat otherwise. (PS: this post was inspired by this tweet from Darrin). In this case, we measure trends by looking at exponential …