Cross-sectional and time-series momentum on the JSE

 

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dc.contributor.advisor Van Rensburg, Paul en_ZA
dc.contributor.author Lockhart-Ross, Simon en_ZA
dc.date.accessioned 2016-07-26T12:23:56Z
dc.date.available 2016-07-26T12:23:56Z
dc.date.issued 2016 en_ZA
dc.identifier.citation Lockhart-Ross, S. 2016. Cross-sectional and time-series momentum on the JSE. University of Cape Town. en_ZA
dc.identifier.uri http://hdl.handle.net/11427/20816
dc.description.abstract This research report documents multiple accounts of past return-based momentum strategies employed on South African-listed equities over the period 2002.02-2015.05. Two cross-sectional momentum approaches-strategies that go long (short) in assets with relative formation period out performance (underperformance) of peer stocks to make the winner (loser) portfolio-and four time-series approaches-strategies that go long (short) in assets with formation period outperformance (underperformance) of a hurdle rate to make the winner (loser) portfolio-are employed in this report. This report finds that both the top decile winner portfolio and top half winner portfolio long-only cross-sectional momentum strategies outperform the benchmark. The 12-month formation period top decile winner achieves the highest long-only excess return of 30.21% per annum, whilst all the loser cross-sectional portfolios constitute a return-reducing funding portfolio when conducting a n investment-neutral winner minus loser approach. Short-term zero investment exposure cross-sectional momentum strategies earn strong negative returns, thus presenting contrarian investment opportunities The two exposure-neutral winner minus loser time-series strategies exhibit similar results to the corresponding cross-sectional strategies, however the variable exposure strategies earn positive returns for every formation period-the 12-month formation period strategy being the best earner (25.92% p.a.). These variable exposure strategies earn time-varying returns from the market due to their non-zero net long market exposure as well as some residual return. This premium is left uncaptured by all investment-neutral app roaches and is a strong cause of the lack of skewness of the variable exposure strategies' returns. All of the examined exposure-neutral strategies exhibit significant leftward skewness due to two incidences of extreme and sustained drawdowns. Both incidences occur as a result of the momentum strategy holding market beta exposure of the opposite sign to the market's drastic turn ; the first: positive exposure and market downturn, the second : negative exposure and positive upturn. These drawdowns are reduced when employing strategies of a more intermediate-term formation period such as the 12-month formation strategy. This report's findings confirm the existence of cross-sectional and time-series momentum in South African-listed equities, as well as the case of equity momentum crashing. Further, it provides evidence for both explained and unexplained variations between the two types of momentum trading, with possibilities for further profitability when combining the two. en_ZA
dc.language.iso eng en_ZA
dc.subject.other Investment Management en_ZA
dc.title Cross-sectional and time-series momentum on the JSE en_ZA
dc.type Master Thesis
uct.type.publication Research en_ZA
uct.type.resource Thesis en_ZA
dc.publisher.institution University of Cape Town
dc.publisher.faculty Faculty of Commerce en_ZA
dc.publisher.department Department of Finance and Tax en_ZA
dc.type.qualificationlevel Masters
dc.type.qualificationname MCom en_ZA
uct.type.filetype Text
uct.type.filetype Image
dc.identifier.apacitation Lockhart-Ross, S. (2016). <i>Cross-sectional and time-series momentum on the JSE</i>. (Thesis). University of Cape Town ,Faculty of Commerce ,Department of Finance and Tax. Retrieved from http://hdl.handle.net/11427/20816 en_ZA
dc.identifier.chicagocitation Lockhart-Ross, Simon. <i>"Cross-sectional and time-series momentum on the JSE."</i> Thesis., University of Cape Town ,Faculty of Commerce ,Department of Finance and Tax, 2016. http://hdl.handle.net/11427/20816 en_ZA
dc.identifier.vancouvercitation Lockhart-Ross S. Cross-sectional and time-series momentum on the JSE. [Thesis]. University of Cape Town ,Faculty of Commerce ,Department of Finance and Tax, 2016 [cited yyyy month dd]. Available from: http://hdl.handle.net/11427/20816 en_ZA
dc.identifier.ris TY - Thesis / Dissertation AU - Lockhart-Ross, Simon AB - This research report documents multiple accounts of past return-based momentum strategies employed on South African-listed equities over the period 2002.02-2015.05. Two cross-sectional momentum approaches-strategies that go long (short) in assets with relative formation period out performance (underperformance) of peer stocks to make the winner (loser) portfolio-and four time-series approaches-strategies that go long (short) in assets with formation period outperformance (underperformance) of a hurdle rate to make the winner (loser) portfolio-are employed in this report. This report finds that both the top decile winner portfolio and top half winner portfolio long-only cross-sectional momentum strategies outperform the benchmark. The 12-month formation period top decile winner achieves the highest long-only excess return of 30.21% per annum, whilst all the loser cross-sectional portfolios constitute a return-reducing funding portfolio when conducting a n investment-neutral winner minus loser approach. Short-term zero investment exposure cross-sectional momentum strategies earn strong negative returns, thus presenting contrarian investment opportunities The two exposure-neutral winner minus loser time-series strategies exhibit similar results to the corresponding cross-sectional strategies, however the variable exposure strategies earn positive returns for every formation period-the 12-month formation period strategy being the best earner (25.92% p.a.). These variable exposure strategies earn time-varying returns from the market due to their non-zero net long market exposure as well as some residual return. This premium is left uncaptured by all investment-neutral app roaches and is a strong cause of the lack of skewness of the variable exposure strategies' returns. All of the examined exposure-neutral strategies exhibit significant leftward skewness due to two incidences of extreme and sustained drawdowns. Both incidences occur as a result of the momentum strategy holding market beta exposure of the opposite sign to the market's drastic turn ; the first: positive exposure and market downturn, the second : negative exposure and positive upturn. These drawdowns are reduced when employing strategies of a more intermediate-term formation period such as the 12-month formation strategy. This report's findings confirm the existence of cross-sectional and time-series momentum in South African-listed equities, as well as the case of equity momentum crashing. Further, it provides evidence for both explained and unexplained variations between the two types of momentum trading, with possibilities for further profitability when combining the two. DA - 2016 DB - OpenUCT DP - University of Cape Town LK - https://open.uct.ac.za PB - University of Cape Town PY - 2016 T1 - Cross-sectional and time-series momentum on the JSE TI - Cross-sectional and time-series momentum on the JSE UR - http://hdl.handle.net/11427/20816 ER - en_ZA


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