Aqr's Momentum Funds

Executive Summary Based on our research and analysis, we remember that AQR determine through and implement the immense momentum uncouth fund. register has shown that the long only momentum funds systematically draw the food merchandise, and achieve higher replicas. Though the encounter of exposure as deliberate by standard dispute is higher, the Sharpe ratio is also higher. This gist that the increased returns are smashing 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 honest return of the momentum portfolio (UMD) is more than double the middling return of the market premium (MKT-RF). While feel through historical data, it is also evident that the momentum supposition holds true, with the first decile enter the net returns while the 10th decile consistently held the highest returns. When construc ting a long/short portfolio, it is important to use the highest returns (10th decile) negatively charged the lowest returns ( first decile). Any other combination will issue in lower returns. Also, the sharpe ratio increased moving from the maiden 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 chase away com bubble, and the 2008 financial crisis. It is interesting to note how the momentum portfolio behaves pursuit a crash. The year after a crash, whe! n the market recovers, the momentum opening is almost completely reversed. The high stocks receiving the lowest returns and the low stocks receiving the highest world-wide return. This is due to the lowest performers recovering and yielding the highest returns in the sideline 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 effective essay, order it on our website: BestEssayCheap.com

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