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Stop losses momentum strategy: From profit maximization to risk control under White’s Bootstrap Reality Check

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  • Teplova, Tamara
  • Mikova, Evgeniya
  • Nazarov, Nikolai

Abstract

This paper proposes a new approach to decision making processes for investors to focus on factor investing and stock selection strategies on the national stock market by capturing the momentum effect (when two portfolios of past relative winners and past losers continue to beat a given benchmark for a certain period of time in the future). Our approach is based on ranking all the combinations of strategy design (5184 strategies) and the disclosure of the momentum effect with two criteria (mean return and risk) controlling for momentum return probability distribution.

Suggested Citation

  • Teplova, Tamara & Mikova, Evgeniya & Nazarov, Nikolai, 2017. "Stop losses momentum strategy: From profit maximization to risk control under White’s Bootstrap Reality Check," The Quarterly Review of Economics and Finance, Elsevier, vol. 66(C), pages 240-258.
    • Handle: RePEc:eee:quaeco:v:66:y:2017:i:c:p:240-258
    DOI: 10.1016/j.qref.2017.03.003
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    More about this item

    Keywords

    Data-snooping; Momentum strategy; Russian stock market; White’s Reality Check; Stationary bootstrap; Risk-return maximization;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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