Why a dynamic momentum strategy?
Momentum returns are usually negatively skewed and subject to occasional severe crashes. Several research papers have recently explored the timing of momentum crashes and show that momentum strategies tend to crash in 1–3 months after the overall market crash. To exploit this fact, researchers propose a dynamic trading strategy which coincides with the standard momentum strategy in calm times, but switches to the opposite contrarian strategy after a market crash and keeps the contrarian position for the following months, after which it reverts back to the momentum position. The dynamic momentum strategy turns all major momentum crashes into gains and yields an average return, which is about 1.5 times as high as the standard momentum return. The dynamic momentum returns are positively skewed and not exposed to risk factors, have high Sharpe ratio and alpha.
Our Stata code
We have written a clean, easy-to-follow, and efficient code in the Stata language for momentum as well as dynamic momentum strategies. The code is well-commented. Each line of code is preceded by a line or two of comments. This makes understanding of the code easier and enjoyable.
What is included in the code
1. The source code in plain text. This means you can access the code and execute it line by line as a do file in one go.
2. The code has detailed comments. These comments explains the logic and the purpose of each line of code
3. All required Stata community-contributed packages that are needed to run the code
4. A dummy data set to apply the code. If you have raw data and want us to process the data to make it compatible with the code, you may contact through email.
5. asdoc code to produce neat and well-formatted tables for the strategies.
For momentum strategies: You can either buy the asm program for building momentum strategies or buy open code for building momentum strategies. The asm program can be used to build as many variations as desired [see more details here]. Open code is available for building a single variations, i.e. formation period (J) or 11 months and holding period (K) of 3 months, etc. Both open code and asm program are available at $79.
For dynamic strategies: Code for dynamic strategies is available for $79.
How the files are shared?
Once you make the payment using the above links, you need to email us so that we can send the files to you.