Aqr's Momentum Funds

Executive Summary Based on our research and analysis, we recommend that AQR shape through and through and implement the want pulsing mutual fund. memorialise has shown that the long moreover pulsation funds systematically fawn the food market, and achieve higher(prenominal) returns. Though the jeopardize of movie as deliberate by standard deviation is higher, the Sharpe balance is also higher. This gist that the step-up returns are not bad(p)er than the increase in risk you are taking. This fund should be a valuable increase that willing generate great concern from your customers. Analysis Looking everyplace the closure from 1927 to 2011, the bonnie return of the urge portfolio (UMD) is more than double the mediocre return of the market gift (MKT-RF). While feel through historical data, it is also unpatterned that the nerve impulse supposition holds true, with the low-spirited decile recording the last-place returns succession the 10th decile consistently held the highest returns. When constructing a long/short portfolio, it is pregnant to use the highest returns (10th decile) negatively aerated the lowest returns ( first decile). whatever other combination will upshot in degrade returns. Also, the sharpe ratio increased moving from the 1st decile to the 10th decile. The neural impulse portfolio has been relatively stable since its excogitation in the late 1920s.

The only times the momentum portfolio failed to nonplus the market was when the market was in turmoil, such as the great depression, the dissipate com bubble, and the 2008 financial crisis. It is provoke to note how the momentum portfolio behaves followers a crash. The year by and by a crash, when the market recovers, the momentum theory is almost entirely reversed. The high stocks receiving the lowest returns and the low stocks receiving the highest general return. This is due to the lowest performers recovering and yielding the highest returns in the following year. If a momentum portfolio is formed from the top 30 centile best performers minus the bottom 30 centile (UMD3), the average return and risk are...If you want to get a safe essay, order it on our website: Orderessay

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