Flexible Momentum: Combining Evolutive Factor Framework To A Dual Momentum Strategy

Abstract

This master thesis reviews momentum models proposed by the literature in the past 30 years and describes the minimal attention given to the construction of their strategy to adapt at best the explanatory power of their model to perceive the momentum anomaly. This study covers the benefits of using an extended range of factors and applying a dynamic aspect to the construction and the rebalancing of a momentum strategy. This study replicates the dual momentum proposed by Clare et al. (2016) and applies the flexible framework. This work brings more evidence of the risk-adjusted performance from dual momentum. Moreover, the enhanced model provides stronger returns with lower monthly trades required to maintain the strategy compared to traditional or dual momentum. These superior results are obtained to the detriment of an inferior risk-adjusted performance compared to the initial model.