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st: Implementing a Momentum Investment Strategy with Stata


From   schmani@gmx.de
To   statalist@hsphsun2.harvard.edu
Subject   st: Implementing a Momentum Investment Strategy with Stata
Date   Sun, 04 Mar 2012 13:43:08 +0100

Dear all,

I am trying to implement a Momentum Strategy following Jegadeesh/Titman(1993): Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency, JoF 48(1), pp. 65-91.

I have monthly returns for ~1400 stocks for a total of 385 time periods and now have to proceed in the following way:

1) build cumulated returns over a formation period of 6months (I did that by generating new variables)

2) select the top 10% performing stocks in order to invest. This is done every month in order to generate so-called "overlapping" portfolios.

3) invest in those stocks for a holding period of 6 months

4) determine the average of the returns and adjust for risk


For now, my approach was to generate matrices for every month t that consist of the cumulated returns over the previous 6 months. 
However I can not find an efficient way to sort these matrices while being able to identify which assets to invest in (this is crucial as I need to tell Stata somehow which assets to invest in).

I am sure there is a better way to sort the cumulated returns of the previous 6 months in every month t while still being able to somehow "track" the variable name in order to invest in the corresponding stock.
I hope I made myself clear, any help would be greatly appreciated!

Best,
Daniel
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