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From |
schmani@gmx.de |

To |
statalist@hsphsun2.harvard.edu |

Subject |
Re: st: Implementing a Momentum Investment Strategy with Stata |

Date |
Tue, 06 Mar 2012 16:49:58 +0100 |

Dear Robson, dear Richard, thank you very much for your input! I haven't yet decided whose approach I am gonna follow, hence I have some more issues for clarification: Robson: By introducing an "identifier" variable do you mean that I need to have one variable for each time-window and hence e.g. tag the top 10 performers with a "1"? How can I achieve this when I only have 385 observations, yet the before-mentioned 1400 stocks? I'm not sure I got the intuition behind your idea. Could you kindly clarify this for me? Richard: I assume you meant the egenmore package from ssc, since I could not find egemore? You are right that Jegadeesh and Titman used equally weighted portfolios, this will also be the approach I follow for my study. I tried using your egen command for one sample-portfolio. Is it correct that the generated variable "portfolio" now has only 1s in it for the time period where the stock has returns? I probably need to fully understand what you were trying to achieve with your usage of f6., l6. and f6. Could you kindly elaborate on that? I should have mentioned that I have log-returns (named: return_v#-return_v####) whose observations consist of the cumulated previous 6m returns where available. It seems to me that the command generates a portfolio based on only one asset (ret6), not on a portfolio of several assets. (my command looked like this: egen portfolio = xtile( return_v1377), nquantiles(10) by (date) ) Do I have to use the whole set of data (i.e. return_v#-return_v####) instead of just one return set? Your help is greatly appreciated, as I am quite a novice in Stata. Best regards, Daniel -------- Original-Nachricht -------- > Datum: Sun, 4 Mar 2012 17:40:42 -0500 > Von: Richard Herron <richard.c.herron@gmail.com> > An: statalist@hsphsun2.harvard.edu > Betreff: Re: st: Implementing a Momentum Investment Strategy with Stata > I don't think there's a need to use -rolling-. I think there are two > main steps here. Generating the portfolios, then generating the time > series of returns for eash of these portfolios. > > I would generate the portfolios using -xtile- from the -egemore- package > (SSC). > > generate ret6 = s6.price / l6.price > egen portfolio = xtile(ret6), nquantiles(10) by(date_ym) > > where -ret6- is your holding period return and -date_ym- is the > year-month date (say 2001m5). Now generate the portfolio holding > period returns using collapse and time series operators. > > collapse (mean) f6.ret6, by(date_ym portfolio) > > You may also want to use weightings to determine portfolio weights > (although I think Jegadeesh and Titman is all equally weighted). Now > you can use these portfolios to generate returns to your strategy. > HTH. > > On Sun, Mar 4, 2012 at 09:20, Robson Glasscock <glasscockrc@vcu.edu> > wrote: > > Christopher Baum's "An Introduction to Stata Programming" discusses > > moving-windows in Chapter 8. The -rolling- command is mentioned as > > well as Cox and Baum's -mvsumm- and -mvcorr- programs (available from > > SSC). Looking into these may help you think about a modified approach > > to your problem. > > > > Instead of using matrices, I wonder if it would be better to generate > > two new variables that would help you identify the top 10% of firms in > > each window. First, generate a "window" variable that would take on a > > value of 1 for months 1-6, 2 for months 2-7, 3 for months 3-8, etc. > > Second, generate an "identifier" variable that tags the top 10% of > > firms in each window. You would know exactly which firms were included > > in each window and then it would be possible for you to calculate the > > returns for those firms over the next six months. Or maybe clever use > > of -rolling- is the better approach here. I'm not sure, but I hope > > this is enough to get you started. > > > > best, > > Robson Glasscock > > > > > > On Sun, Mar 4, 2012 at 7:43 AM, <schmani@gmx.de> wrote: > >> 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 > >> -- > >> NEU: FreePhone 3-fach-Flat mit kostenlosem Smartphone! > >> Jetzt informieren: http://mobile.1und1.de/?ac=OM.PW.PW003K20328T7073a > >> * > >> * For searches and help try: > >> * http://www.stata.com/help.cgi?search > >> * http://www.stata.com/support/statalist/faq > >> * http://www.ats.ucla.edu/stat/stata/ > > > > * > > * For searches and help try: > > * http://www.stata.com/help.cgi?search > > * http://www.stata.com/support/statalist/faq > > * http://www.ats.ucla.edu/stat/stata/ > > * > * For searches and help try: > * http://www.stata.com/help.cgi?search > * http://www.stata.com/support/statalist/faq > * http://www.ats.ucla.edu/stat/stata/ -- NEU: FreePhone 3-fach-Flat mit kostenlosem Smartphone! Jetzt informieren: http://mobile.1und1.de/?ac=OM.PW.PW003K20328T7073a * * For searches and help try: * http://www.stata.com/help.cgi?search * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/

**Follow-Ups**:**Re: st: Implementing a Momentum Investment Strategy with Stata***From:*Richard Herron <richard.c.herron@gmail.com>

**References**:**st: Implementing a Momentum Investment Strategy with Stata***From:*schmani@gmx.de

**Re: st: Implementing a Momentum Investment Strategy with Stata***From:*Robson Glasscock <glasscockrc@vcu.edu>

**Re: st: Implementing a Momentum Investment Strategy with Stata***From:*Richard Herron <richard.c.herron@gmail.com>

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