These 33 stocks are top ranked by momentum currently. How many of these do you have in your portfolio currently. Do your trading methods identify such stocks early enough.What triggers momentum phases in stocks. Momentum is the most persistent anomaly till date. In his recent book Quantitative Strategies For Achieving Alpha, Richard Tortoriello did a exhaustive study of all the factor which drive stock prices in the short and long run.The number one factor according to the research was momentum.
See my previous post:
Quantitative Strategies for Achieving Alpha (McGraw-Hill Finance & Investing)
In this book Richard Tortoriello sets out find empirical drivers for stock market returns. This is a new book published last month. The author tests 1200 strategies on stock above 500 million valuation to determine the major fundamental and market based drivers for future stock market returns.After such analysis he presents strategies that consistently outperform the market.
The author tests 7 basic categories of stocks factors:
- Cash flow
- Capital allocation
- Price momentum
- Red Flags ( risk factors)
Detailed quantitative tests for each of the factors are presented in the book. As the author works for S&P, he has access to the best database on stocks and he presents his findings for multiple factors within each of the above seven categories. The testing shows that the top single factor strategy for achieving excess return is price momentum calculated using 28/16 relative strength. The best strategy using two combined factor for excess return is price momentum plus nearness 52 week high.
This book unlike other quant books is easy to understand and well presented. The biggest advantage of this book is it will give you building blocks to build your trading strategy around things that empirically work in the market. Knowing what works and why it works can help you build better trading models.