BFF5220 Assignment: Momentum Trading Strategy Backtesting Analysis

This assignment examines the performance of a momentum trading strategy through backtesting and literature review, focusing on whether buying past winners is profitable. The student explores the momentum effect, referencing Jegadeesh & Titman (2001) and other sources to establish the theoretical basis for the strategy. The study backtests the performance of portfolios of winners and losers, analyzing the results to determine their statistical significance and compare them to the arguments of Jegadeesh & Titman (2001). The analysis includes factor returns, alpha values, and p-values to assess the strategy's effectiveness. The findings suggest that the winners' portfolio shows statistical significance in predicting stock returns, supporting the original hypothesis. The assignment concludes by discussing the implications of the results for momentum traders and the validity of the Jegadeesh & Titman (2001) arguments.