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Cross-sectional and time-series momentum on the JSE
This research report documents multiple accounts of past return-based momentum strategies employed on South African-listed equities over the period 2002.02-2015.05. Two cross-sectional momentum approaches-strategies that go long (short) in assets with relative formation period out performance (under...
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| Format: | Thesis |
| Language: | English |
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Department of Finance and Tax
2016
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| _version_ | 1867613551466643456 |
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| access_status_str | Open Access |
| author | Lockhart-Ross, Simon |
| author2 | Van Rensburg, Paul |
| author_browse | Lockhart-Ross, Simon Van Rensburg, Paul |
| author_facet | Van Rensburg, Paul Lockhart-Ross, Simon |
| author_sort | Lockhart-Ross, Simon |
| collection | Thesis |
| description | This research report documents multiple accounts of past return-based momentum strategies employed on South African-listed equities over the period 2002.02-2015.05. Two cross-sectional momentum approaches-strategies that go long (short) in assets with relative formation period out performance (underperformance) of peer stocks to make the winner (loser) portfolio-and four time-series approaches-strategies that go long (short) in assets with formation period outperformance (underperformance) of a hurdle rate to make the winner (loser) portfolio-are employed in this report. This report finds that both the top decile winner portfolio and top half winner portfolio long-only cross-sectional momentum strategies outperform the benchmark. The 12-month formation period top decile winner achieves the highest long-only excess return of 30.21% per annum, whilst all the loser cross-sectional portfolios constitute a return-reducing funding portfolio when conducting a n investment-neutral winner minus loser approach. Short-term zero investment exposure cross-sectional momentum strategies earn strong negative returns, thus presenting contrarian investment opportunities The two exposure-neutral winner minus loser time-series strategies exhibit similar results to the corresponding cross-sectional strategies, however the variable exposure strategies earn positive returns for every formation period-the 12-month formation period strategy being the best earner (25.92% p.a.). These variable exposure strategies earn time-varying returns from the market due to their non-zero net long market exposure as well as some residual return. This premium is left uncaptured by all investment-neutral app roaches and is a strong cause of the lack of skewness of the variable exposure strategies' returns. All of the examined exposure-neutral strategies exhibit significant leftward skewness due to two incidences of extreme and sustained drawdowns. Both incidences occur as a result of the momentum strategy holding market beta exposure of the opposite sign to the market's drastic turn ; the first: positive exposure and market downturn, the second : negative exposure and positive upturn. These drawdowns are reduced when employing strategies of a more intermediate-term formation period such as the 12-month formation strategy. This report's findings confirm the existence of cross-sectional and time-series momentum in South African-listed equities, as well as the case of equity momentum crashing. Further, it provides evidence for both explained and unexplained variations between the two types of momentum trading, with possibilities for further profitability when combining the two. |
| format | Thesis |
| id | oai:open.uct.ac.za:11427/20816 |
| institution | University of Cape Town (South Africa) |
| language | eng |
| last_indexed | 2026-06-10T12:37:57.006Z |
| license_str | Not specified — see source repository |
| provenance_str_mv | Harvested via OAI-PMH from UCTD — University of Cape Town Open Access Repository |
| publishDate | 2016 |
| publishDateRange | 2016 |
| publishDateSort | 2016 |
| publisher | Department of Finance and Tax |
| publisherStr | Department of Finance and Tax |
| record_format | dspace |
| source_str | UCTD — University of Cape Town Open Access Repository |
| spelling | oai:open.uct.ac.za:11427/20816 Cross-sectional and time-series momentum on the JSE Lockhart-Ross, Simon Van Rensburg, Paul Investment Management This research report documents multiple accounts of past return-based momentum strategies employed on South African-listed equities over the period 2002.02-2015.05. Two cross-sectional momentum approaches-strategies that go long (short) in assets with relative formation period out performance (underperformance) of peer stocks to make the winner (loser) portfolio-and four time-series approaches-strategies that go long (short) in assets with formation period outperformance (underperformance) of a hurdle rate to make the winner (loser) portfolio-are employed in this report. This report finds that both the top decile winner portfolio and top half winner portfolio long-only cross-sectional momentum strategies outperform the benchmark. The 12-month formation period top decile winner achieves the highest long-only excess return of 30.21% per annum, whilst all the loser cross-sectional portfolios constitute a return-reducing funding portfolio when conducting a n investment-neutral winner minus loser approach. Short-term zero investment exposure cross-sectional momentum strategies earn strong negative returns, thus presenting contrarian investment opportunities The two exposure-neutral winner minus loser time-series strategies exhibit similar results to the corresponding cross-sectional strategies, however the variable exposure strategies earn positive returns for every formation period-the 12-month formation period strategy being the best earner (25.92% p.a.). These variable exposure strategies earn time-varying returns from the market due to their non-zero net long market exposure as well as some residual return. This premium is left uncaptured by all investment-neutral app roaches and is a strong cause of the lack of skewness of the variable exposure strategies' returns. All of the examined exposure-neutral strategies exhibit significant leftward skewness due to two incidences of extreme and sustained drawdowns. Both incidences occur as a result of the momentum strategy holding market beta exposure of the opposite sign to the market's drastic turn ; the first: positive exposure and market downturn, the second : negative exposure and positive upturn. These drawdowns are reduced when employing strategies of a more intermediate-term formation period such as the 12-month formation strategy. This report's findings confirm the existence of cross-sectional and time-series momentum in South African-listed equities, as well as the case of equity momentum crashing. Further, it provides evidence for both explained and unexplained variations between the two types of momentum trading, with possibilities for further profitability when combining the two. 2016-07-26T12:23:56Z 2016-07-26T12:23:56Z 2016 Master Thesis Masters MCom http://hdl.handle.net/11427/20816 eng application/pdf Department of Finance and Tax Faculty of Commerce University of Cape Town |
| spellingShingle | Investment Management Lockhart-Ross, Simon Cross-sectional and time-series momentum on the JSE |
| thesis_degree_str | Master's |
| title | Cross-sectional and time-series momentum on the JSE |
| title_full | Cross-sectional and time-series momentum on the JSE |
| title_fullStr | Cross-sectional and time-series momentum on the JSE |
| title_full_unstemmed | Cross-sectional and time-series momentum on the JSE |
| title_short | Cross-sectional and time-series momentum on the JSE |
| title_sort | cross sectional and time series momentum on the jse |
| topic | Investment Management |
| url | http://hdl.handle.net/11427/20816 |
| work_keys_str_mv | AT lockhartrosssimon crosssectionalandtimeseriesmomentumonthejse |