Quantitative investment refers to the use of modern finance, econometrics, statistics, and mathematics methods, relying on historical data and some quantitative models, and the preparation of corresponding computer programs to guide investment, and strive to achieve stable, sustainable, and higher than Average excess returns.
Momentum strategy is one of the quantitative trading strategies. The basic idea is derived from the momentum effect, often called the "inertia effect." The momentum effect was proposed by Jegadeesh and Titman in 1993. It refers to the tendency of stock returns to continue in the original direction of movement. That is, stocks with higher returns in the past will still have higher returns in the future than stocks with lower returns in the past. of stocks.
Momentum strategies can be divided into time series momentum strategies and cross-sectional momentum strategies. In the time series momentum strategy, investors go long on assets with a significant previous upward trend and short on assets with a previous significant downward trend; the long (short) investment strategy is relative to a single asset. In a cross-sectional momentum strategy, investors go long on investments that have performed relatively well before and go short on investments that have performed relatively poorly before.
The reversal strategy is another quantitative trading strategy. Contrary to the momentum strategy, the reversal effect believes that assets that performed poorly in the previous period will reverse in the next period, that is, assets with lower returns in the past period will have higher returns in the future than in the past. Assets with higher rates are like what we often call oversold rebounds or oversolds turning down. In 1985, De Bondt and Thaler proposed that there is a reversal effect in the stock market and that excess returns can be obtained based on this. The reversal effect may be caused by scale factors, seasonal cycles, or risk factors.