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A Physics-Inspired Momentum Measure for Weekly Contrarian Strategies

Article arXiv papers · Author: Jaehyung Choi
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Summary

The study defines price momentum using analogies to physical velocity and mass, then uses this measure to select assets for weekly contrarian strategies. It applies the approach to South Korea’s KOSPI 200 and the US S&P 500 universes, comparing the resulting strategies with a traditional contrarian strategy.

The document reports better expected returns and reward-to-risk measures for the alternatives on a weekly scale. It also says the portfolio performance is not explained by the Fama–French three-factor model. The excerpt provides no sample period, implementation rules, transaction costs, or detailed robustness evidence, so the reported comparison does not establish whether the results would persist in live trading.

Key ideas

  • Price momentum is quantified with measures inspired by physical velocity and mass.
  • The measure is used to select assets for weekly contrarian strategies.
  • The strategies are evaluated in KOSPI 200 and S&P 500 universes.
  • The document reports improved expected returns and reward-to-risk measures versus a traditional contrarian strategy.
  • Fama–French three-factor analysis does not explain the reported portfolio performance.

Tags

EquitiesMomentumMean reversionPortfolio constructionRisk management
Full text
# Physical approach to price momentum and its application to momentum strategy


# Physical approach to price momentum and its application to momentum strategy









We introduce various quantitative and mathematical definitions for price momentum of financial instruments. The price momentum is quantified with velocity and mass concepts originated from the momentum in physics. By using the physical momentum of price as a selection criterion, the weekly contrarian strategies are implemented in South Korea KOSPI 200 and US S&P 500 universes. The alternative strategies constructed by the physical momentum achieve the better expected returns and reward-risk measures than those of the traditional contrarian strategy in weekly scale. The portfolio performance is not understood by the Fama-French three-factor model.

Shown in full with attribution under the source's licence. Licence: abstract CC0

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.