What is the optimal lookback period?
SUMMARY
INTRODUCTION
Most fund managers are skeptical of the momentum factor because selecting stocks based on it requires little expertise – a spreadsheet and basic math often suffice. As a result, charging high fees for fund pursuing a momentum-based portfolio is challenging.
Yet, the substantial body of research demonstrating attractive excess returns from momentum cannot be ignored. One way to add value is by creating a more sophisticated version of the factor, for example, by measuring momentum through Sharpe ratios, alpha, or a combination of multiple metrics (read Momentum Variations