Advances in Economics, Management and Political Sciences
- The Open Access Proceedings Series for Conferences
Proceedings of the 2nd International Conference on Financial Technology and Business Analysis
Series Vol. 50 , 01 December 2023
Open
Access | Article
Application of Momentum Strategy to S&P 500: A Five-Year Retrospective Analysis
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Abstract
Momentum strategy, a popular approach since the 1990s, has seen various successful iterations over the years. However, with the market environment evolving considerably in recent times, this study seeks to explore the efficacy of a specific momentum strategy on the S&P 500 in the past five years. The hypothesis centers on the correlation between returns and the moving average, serving as a momentum indicator. A simple linear model relating the two is trained using historical data, and the subsequent strategy is formed based on the model's parameters. Different lookback periods are considered, leading to an evaluation of diverse strategies. Despite the strategy's simplicity, findings suggest that it might struggle to thrive in real market conditions. There are some strategies that beat the benchmark under ideal conditions, but all of them loss when the transection fees are taken into account. The analysis uncovers situations where momentum strategies can indeed be effective. This underlines the potential for further research and the development of a more sophisticated, precise strategy that mirrors real market dynamics with greater accuracy.
Keywords
momentum strategy, S&P 500, trading strategy
References
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Data Availability
The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.
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- Volume Title
- Proceedings of the 2nd International Conference on Financial Technology and Business Analysis
- ISBN (Print)
- 978-1-83558-147-6
- ISBN (Online)
- 978-1-83558-148-3
- Published Date
- 01 December 2023
- Series
- Advances in Economics, Management and Political Sciences
- ISSN (Print)
- 2754-1169
- ISSN (Online)
- 2754-1177
- DOI
- 10.54254/2754-1169/50/20230547
- Copyright
- 01 December 2023
- Open Access
- This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited