Trend factor revisited: asset pricing factors over multiple investment horizons

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Volume Title
School of Business | Bachelor's thesis
Date
2017
Major/Subject
Mcode
Degree programme
Rahoitus
Language
en
Pages
17
Series
Abstract
In this paper, I provide alternative formulations to the price trend factor of Han, Zhou and Zhu (2016), using returns instead of prices. The price trend factor is also constructed and compared with the return trend factors. Two market equity based factors were also constructed, but they showed little interest in themselves. Several tests were conducted that actually attested to the robustness and appeal of the price trend factor. The return trends showed each some weaknesses along the tests. The individual moving average lengths used in the factor construction were also explored and they revealed the adaptability of the price trend factor, which is the primary explanation of this study to the factor’s good performance. For future research, the construction of other factors with the same method seem most fruitful.
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Thesis advisor
Kasanen, Eero
Keywords
trend factor, moving averages, factor performance, momentum, factor models, asset pricing
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