Equally weighted portfolios and “momentum effect”: an interesting combination for unsophisticated investors?
This article proposes investment strategies targeted at unsophisticated investors and structured around persistence in returns, especially in the short and medium term (“momentum effect”). Sixty-four equally weighted portfolios were formed, through the variation of five different parameters: size, r...
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| Format: | Article |
| Language: | English |
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FUCAPE Business School
2020-01-01
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| Series: | BBR: Brazilian Business Review |
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| Online Access: | http://www.redalyc.org/articulo.oa?id=123064464002 |
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| author | Fabio Civiletti Carlos Heitor Campani Raphael Roquete |
| author_facet | Fabio Civiletti Carlos Heitor Campani Raphael Roquete |
| author_sort | Fabio Civiletti |
| collection | DOAJ |
| description | This article proposes investment strategies targeted at unsophisticated investors and structured around persistence in returns, especially in the short and medium term (“momentum effect”). Sixty-four equally weighted portfolios were formed, through the variation of five different parameters: size, revision frequency, asset selection indicator, choice criterion, and formation period. The proposed portfolios’ performances were assessed from January 2009 to December 2018 and compared to the performance of BOVA11 (Exchange Traded Fund which aims to replicate Ibovespa, the main stock market index in Brazil). Transaction costs were considered. The results corroborate the hypothesis of the “momentum effect”. Winner portfolios also were indicated asgood alternatives as investment strategies, since they presented higher median returns and Sharpe ratios than the benchmark, as well as positive alphas. Additional tests showed that transaction costs can significantly impact the portfolios’ performances. The analysis presented in this paper shall be relevant to unsophisticated investors, introducing a competitive though easy-to-implement investment strategy. |
| format | Article |
| id | doaj-art-63fc7b7aae164ad6b877bb9abc59056a |
| institution | Kabale University |
| issn | 1807-734X |
| language | English |
| publishDate | 2020-01-01 |
| publisher | FUCAPE Business School |
| record_format | Article |
| series | BBR: Brazilian Business Review |
| spelling | doaj-art-63fc7b7aae164ad6b877bb9abc59056a2025-02-06T23:39:33ZengFUCAPE Business SchoolBBR: Brazilian Business Review1807-734X2020-01-0117550652210.15728/bbr.2020.17.5.2Equally weighted portfolios and “momentum effect”: an interesting combination for unsophisticated investors?Fabio CivilettiCarlos Heitor CampaniRaphael RoqueteThis article proposes investment strategies targeted at unsophisticated investors and structured around persistence in returns, especially in the short and medium term (“momentum effect”). Sixty-four equally weighted portfolios were formed, through the variation of five different parameters: size, revision frequency, asset selection indicator, choice criterion, and formation period. The proposed portfolios’ performances were assessed from January 2009 to December 2018 and compared to the performance of BOVA11 (Exchange Traded Fund which aims to replicate Ibovespa, the main stock market index in Brazil). Transaction costs were considered. The results corroborate the hypothesis of the “momentum effect”. Winner portfolios also were indicated asgood alternatives as investment strategies, since they presented higher median returns and Sharpe ratios than the benchmark, as well as positive alphas. Additional tests showed that transaction costs can significantly impact the portfolios’ performances. The analysis presented in this paper shall be relevant to unsophisticated investors, introducing a competitive though easy-to-implement investment strategy.http://www.redalyc.org/articulo.oa?id=123064464002momentum effectequally weighted portfoliosunsophisticated investorstock |
| spellingShingle | Fabio Civiletti Carlos Heitor Campani Raphael Roquete Equally weighted portfolios and “momentum effect”: an interesting combination for unsophisticated investors? BBR: Brazilian Business Review momentum effect equally weighted portfolios unsophisticated investor stock |
| title | Equally weighted portfolios and “momentum effect”: an interesting combination for unsophisticated investors? |
| title_full | Equally weighted portfolios and “momentum effect”: an interesting combination for unsophisticated investors? |
| title_fullStr | Equally weighted portfolios and “momentum effect”: an interesting combination for unsophisticated investors? |
| title_full_unstemmed | Equally weighted portfolios and “momentum effect”: an interesting combination for unsophisticated investors? |
| title_short | Equally weighted portfolios and “momentum effect”: an interesting combination for unsophisticated investors? |
| title_sort | equally weighted portfolios and momentum effect an interesting combination for unsophisticated investors |
| topic | momentum effect equally weighted portfolios unsophisticated investor stock |
| url | http://www.redalyc.org/articulo.oa?id=123064464002 |
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