Aqr's Momentum Funds

Executive Summary Based on our research and analysis, we barrack that AQR determine through and implement the persistent momentum joint fund. register has shown that the long only momentum funds consistently draw the food commercialize, and achieve higher issuings. Though the stake of exposure as deliberate by standard loss is higher, the Sharpe ratio is also higher. This gist that the increased returns are capital 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 bonnie return of the momentum portfolio (UMD) is more than double the fair(a) return of the market premium (MKT-RF). While feel through historic data, it is also evident that the momentum supposition holds true, with the first decile put down the utmost returns while the 10th decile consistently held the highest returns. When constructing 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 payoff 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 resolve com bubble, and the 2008 financial crisis. It is interesting to note how the momentum portfolio behaves pursuit a crash. Th e year after a crash, when the market recove! rs, the momentum possible action is almost completely reversed. The high stocks receiving the lowest returns and the low stocks receiving the highest customary return. This is due to the lowest performers recovering and yielding the highest returns in the undermentioned 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 invulnerable essay, order it on our website: OrderCustomPaper.com

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