Volume : V, Issue : I, January - 2016

Quantifying Randomness: A New Model for Momentum Trading

Dr. Jay Desai, Nisarg A Joshi

Abstract :

Recently quantitative trading based on momentum is gaining more attention, maybe because of the fact good quantitative models have delivered significant returns in last decade. The profitability of investing and trading in the stock market to a large extent depends on the ability of a trader in developing robust system. At present there many momentum trading strategies are available but there are very few robust methods of stock selection available. In this paper a new model to quantify randomness of security is proposed. The model takes in to computation random walk of a security, systematic risk and unsystematic risk. The stocks selected through the model are then tested in Indian derivatives market by using simple moving average based filter rules. The portfolio tested in the paper outperformed the benchmark with a significant margin. The Sharpe ratio of the portfolio was found to be three times the benchmark. 

Keywords :

Article: Download PDF    DOI : https://www.doi.org/10.36106/gjra  

Cite This Article:

Dr. Jay Desai, Nisarg A Joshi Quantifying Randomness: A New Model for Momentum Trading Global Journal For Research Analysis, Vol: 5, Issue: 1 January 2016

Number of Downloads : 1104

References :