Aqr's Momentum Funds

Executive Summary Based on our research and analysis, we urge that AQR determine through and implement the yearn momentum vernacular fund. register has shown that the long only momentum funds systematically draw the food commercialize, and achieve higher rejoins. Though the danger of exposure as deliberate by standard dispute is higher, the Sharpe ratio is also higher. This gist that the increased returns are enceinte than the increase in risk you are taking. This fund should be a valuable increase that will generate great interest from your customers. Analysis Looking everyplace the period from 1927 to 2011, the fairish return of the momentum portfolio (UMD) is more than double the just return of the market premium (MKT-RF). While feel through historic data, it is also evident that the momentum supposition holds true, with the first decile save the final returns while the 10th decile consistently held the highest returns. When constructing a lon g/short portfolio, it is important to use the highest returns (10th decile) negatively charged the lowest returns ( first decile). Any other combination will outlet in lower returns. Also, the sharpe ratio increased moving from the foremost decile to the 10th decile. The momentum portfolio has been relatively stable since its conception in the late 1920s.

The only times the momentum portfolio failed to beat the market was when the market was in turmoil, such as the great depression, the open com bubble, and the 2008 financial crisis. It is interesting to note how the momentum portfolio behaves pursuit a crash. The year after a cra sh, when the market recovers, the momentum ! scheme is almost completely reversed. The high stocks receiving the lowest returns and the low stocks receiving the highest universal return. This is due to the lowest performers recovering and yielding the highest returns in the undermentioned year. If a momentum portfolio is formed from the top 30 percentile best performers minus the bottom 30 percentile (UMD3), the average return and risk are...If you want to get a sound essay, order it on our website: BestEssayCheap.com

If you want to get a full essay, visit our page: cheap essay