Monthly Long-Short Stock Momentum Using Trailing 12-Month Returns

Summary

This algorithm implements a monthly cross-sectional momentum strategy in US equities. It ranks eligible stocks by their trailing 12-month return, with the most recent month skipped to reduce microstructure and liquidity biases. The highest-ranked group is held long and the lowest-ranked group short, with each side equally weighted. The strategy description identifies NYSE, AMEX, and NASDAQ stocks as the intended universe, while this implementation narrows selection to a large, liquid subset of the US stock universe.

The code refreshes selection monthly, uses daily adjusted prices to maintain return history, and applies a custom transaction fee and leverage setting. It specifies a start date and initial cash, but the supplied document reports no backtest results, benchmark comparison, or risk statistics. Implementation choices, including leverage, universe restrictions, costs, and the mechanics of shorting, can materially affect results; the code should not be treated as evidence that the factor will persist.

Key ideas

• The strategy ranks stocks by 12-month return while excluding the latest month's return.
• It takes long positions in the strongest-ranked stocks and short positions in the weakest-ranked stocks.
• Positions within each side are equally weighted and selection is refreshed monthly.
• The implementation uses a restricted US stock universe and models fees and leverage, but supplies no performance results.

Tags

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