Six-Month Momentum and Reversal Within High-Volatility Stocks

Summary

The strategy forms a monthly long-short equity portfolio from NYSE, AMEX, and NASDAQ stocks priced above five dollars. It first keeps the larger half of the eligible universe by market capitalization, then ranks stocks by six-month realized return and volatility, skipping the most recent week to reduce microstructure bias. Within the highest-volatility group, it buys the strongest-performing return quintile and shorts the weakest-performing return quintile. Holdings are equally weighted and maintained for six months, with one sixth of the portfolio refreshed each month.

The code illustrates a QuantConnect implementation, but alters the described universe to the 1,000 most liquid eligible stocks for computational reasons. It includes rolling price histories, monthly selection, staggered rebalancing, and a custom fee model. No performance results or validation evidence are included, so the code is an implementation example rather than proof of an edge. The portfolio is exposed to shorting, leverage and trading-cost assumptions; its realized behavior may differ from the stated design because of universe filtering and implementation details.

Key ideas

• The method ranks stocks on six-month returns and realized volatility, omitting the latest week from calculations.
• It goes long the best-performing quintile and short the worst-performing quintile among the highest-volatility stocks.
• The described portfolio holds positions for six months and refreshes one sixth monthly.
• The code limits selection to the 1,000 most liquid stocks for computational reasons.
• The document gives no performance results, and implementation assumptions may affect outcomes.

Tags

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