Physical approach to price momentum and its application to momentum strategy
AbstractWe introduce various definitions for price momentum of financial instruments in quantitative and mathematical ways. Measurement of the price momentum derived from the concept of momentum in physics can be conducted with velocity and mass defined in diverse manners. By using the physical momentum of price as a selection criterion, the momentum/contrarian strategies are implemented with equities in the South Korean stock markets including the KOSPI 200 and its subuniverses. The physical momentum strategies provide better expected returns and risk-reward ratios than those of the traditional momentum strategy at many lookback-holding pairs in weekly scales and short terms in monthly scales. In addition to that, the spontaneously symmetry breaking of arbitrage is also tested for the physical momentum strategies and the strategies with a scheme from the symmetry breaking of arbitrage generate the stronger performance and increase stability of the portfolios than the strategies without the scheme.
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Bibliographic InfoPaper provided by arXiv.org in its series Papers with number 1208.2775.
Date of creation: Aug 2012
Date of revision: Sep 2012
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-08-23 (All new papers)
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