{"id":21498,"date":"2024-03-08T16:11:37","date_gmt":"2024-03-08T08:11:37","guid":{"rendered":"https:\/\/www.tejwin.com\/?post_type=insight&#038;p=21498"},"modified":"2024-06-19T16:33:15","modified_gmt":"2024-06-19T08:33:15","slug":"tquant-lab-price-momentum-factor-strategy","status":"publish","type":"insight","link":"https:\/\/www.tejwin.com\/en\/insight\/tquant-lab-price-momentum-factor-strategy\/","title":{"rendered":"Price Momentum Factor Strategy: The Market Favors the Strong"},"content":{"rendered":"\n<figure class=\"wp-block-image aligncenter size-full caption-align-center\"><img fetchpriority=\"high\" decoding=\"async\" width=\"5988\" height=\"3984\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/behnam-norouzi-P4WNwqaen7o-unsplash.jpg\" alt=\"Momentum Factor Strategy\" class=\"wp-image-20901\" style=\"aspect-ratio:1.5;object-fit:cover\" srcset=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/behnam-norouzi-P4WNwqaen7o-unsplash.jpg 5988w, https:\/\/www.tejwin.com\/wp-content\/uploads\/behnam-norouzi-P4WNwqaen7o-unsplash-300x200.jpg 300w, https:\/\/www.tejwin.com\/wp-content\/uploads\/behnam-norouzi-P4WNwqaen7o-unsplash-1024x681.jpg 1024w, https:\/\/www.tejwin.com\/wp-content\/uploads\/behnam-norouzi-P4WNwqaen7o-unsplash-150x100.jpg 150w, https:\/\/www.tejwin.com\/wp-content\/uploads\/behnam-norouzi-P4WNwqaen7o-unsplash-768x511.jpg 768w, https:\/\/www.tejwin.com\/wp-content\/uploads\/behnam-norouzi-P4WNwqaen7o-unsplash-1536x1022.jpg 1536w, https:\/\/www.tejwin.com\/wp-content\/uploads\/behnam-norouzi-P4WNwqaen7o-unsplash-2048x1363.jpg 2048w\" sizes=\"(max-width: 5988px) 100vw, 5988px\" \/><figcaption class=\"wp-element-caption\">Photo by <a href=\"https:\/\/unsplash.com\/@behy_studio?utm_content=creditCopyText&amp;utm_medium=referral&amp;utm_source=unsplash\" target=\"_blank\" rel=\"noopener\">Behnam Norouzi<\/a> on <a href=\"https:\/\/unsplash.com\/photos\/black-flat-screen-computer-monitor-turned-on-beside-black-computer-keyboard-P4WNwqaen7o?utm_content=creditCopyText&amp;utm_medium=referral&amp;utm_source=unsplash\" target=\"_blank\" rel=\"noopener\">Unsplash<\/a><\/figcaption><\/figure>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_81 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69f12c5b36985\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"ez-toc-cssicon\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69f12c5b36985\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.tejwin.com\/en\/insight\/tquant-lab-price-momentum-factor-strategy\/#Highlight\" >Highlight<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.tejwin.com\/en\/insight\/tquant-lab-price-momentum-factor-strategy\/#Introduction\" >Introduction<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.tejwin.com\/en\/insight\/tquant-lab-price-momentum-factor-strategy\/#Momentum_Factor_Strategy\" >Momentum Factor Strategy<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.tejwin.com\/en\/insight\/tquant-lab-price-momentum-factor-strategy\/#Editing_Environment_and_Module_Requirements\" >Editing Environment and Module Requirements<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.tejwin.com\/en\/insight\/tquant-lab-price-momentum-factor-strategy\/#Establishing_the_Daily_Trading_Strategy\" >Establishing the Daily Trading Strategy<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.tejwin.com\/en\/insight\/tquant-lab-price-momentum-factor-strategy\/#Creating_the_trading_environment\" >Creating the trading environment<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.tejwin.com\/en\/insight\/tquant-lab-price-momentum-factor-strategy\/#Creating_the_trading_strategy\" >Creating the trading strategy<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.tejwin.com\/en\/insight\/tquant-lab-price-momentum-factor-strategy\/#Executing_the_Trading_Strategy\" >Executing the Trading Strategy<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.tejwin.com\/en\/insight\/tquant-lab-price-momentum-factor-strategy\/#Performance_Evaluation_Using_Pyfolio\" >Performance Evaluation Using Pyfolio<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.tejwin.com\/en\/insight\/tquant-lab-price-momentum-factor-strategy\/#Conclusion\" >Conclusion<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.tejwin.com\/en\/insight\/tquant-lab-price-momentum-factor-strategy\/#Extended_Reading\" >Extended Reading<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Highlight\"><\/span>Highlight<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Article Difficulty: \u2605\u2605\u2605\u2606\u2606<\/li>\n\n\n\n<li>Explore the relationship between price momentum and expected stock returns.<\/li>\n\n\n\n<li>Develope and backtest Price Momentum Factor Strategy strategies using the TQuant Lab backtesting platform to assess risks and performance.<\/li>\n\n\n\n<li>Adapted from <a href=\"https:\/\/www.tejwin.com\/en\/news\/the-relationship-between-stock-price-momentum-and-expected-return\/\" class=\"ek-link\">The Relationship between Price Momentum and Expected Stock Returns.<\/a><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Introduction\"><\/span>Introduction<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Previous research on price momentum has found a positive correlation between the 26-week price deviation rate and future stock returns in the U.S. stock market. Jegadeesh and Titman identified a momentum effect in the U.S. stock market \u2013 <strong><mark style=\"background-color:rgba(0, 0, 0, 0);color:#0763e3\" class=\"has-inline-color\">buying stocks with the best past 6-12 months returns while simultaneously selling stocks with the worst past 6-12 months yielded significant excess returns economically and statistically<\/mark><\/strong>. Subsequent studies by many scholars have also found that momentum effects are prevalent in international stock markets and across different asset classes.<\/p>\n\n\n\n<p>In recent years, regulatory efforts to enhance information disclosure in the stock market, coupled with gradual relaxations in the volatility of stock market fluctuations, have rapidly increased the efficiency of the Taiwan stock market. Therefore, it is worth further examining the relationship between price momentum and expected stock returns in the Taiwanese stock market. To explore this relationship, academia and industry have developed numerous indicators to measure stock momentum. In addition to indicators based on past cumulative returns, there are also indicators utilizing volatility-adjusted cumulative stock returns, moving average divergences, CAPM residuals&#8217; cumulative values, Etc. This article will use our previous research findings:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Univariate analysis shows that the <strong>JTMOM3 formed over three<\/strong> months and the <strong>MAD<\/strong> momentum variable based on moving average divergences exhibit the most economically and statistically significant predictive ability for stock expected returns.<\/li>\n\n\n\n<li>Multivariate analysis shows that even after controlling for one-year beta values, price-to-book ratios, market capitalization, and 12-month momentum characteristic variables, the relationship between <strong>JTMOM3 and MAD momentum variables and stock expected returns remains significantly positive. <\/strong>This indicates their predictive and explanatory power for cross-sectional stock expected returns.<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" width=\"626\" height=\"577\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/image-408.png\" alt=\"Momentum Factor Strategy\" class=\"wp-image-21505\" srcset=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/image-408.png 626w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-408-300x277.png 300w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-408-150x138.png 150w\" sizes=\"(max-width: 626px) 100vw, 626px\" \/><\/figure>\n\n\n\n<p>Hence, this article will primarily utilize <strong>JTMOM3<\/strong> and <strong>MAD<\/strong> momentum variables for backtesting analysis.<br>For more detailed information, please refer to <a href=\"https:\/\/www.tejwin.com\/en\/news\/the-relationship-between-stock-price-momentum-and-expected-return\/\" class=\"ek-link\">The Relationship between Price Momentum and Expected Stock Returns.<\/a><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Momentum_Factor_Strategy\"><\/span>Momentum Factor Strategy<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Calculate the <strong><em>average stock returns over the past three months<\/em>.<\/strong><\/li>\n\n\n\n<li>Calculate the <strong><em>Moving Average Divergence (MAD)<\/em><\/strong> as the exit condition for the Golden Cross.<\/li>\n\n\n\n<li>Divide trading into recording months (first three months) and trading months (fourth month) using a four-month cycle:\n<ul class=\"wp-block-list\">\n<li>Record momentum for each stock over the past three months during the recording month and execute orders during the trading month.<\/li>\n\n\n\n<li>On the &#8220;<strong>last day<\/strong>&#8221; of the trading month, buy the top 5% performing stocks in terms of momentum from the stock pool and simultaneously short the bottom 5% performing stocks. (With a one-month gap between momentum formation periods to avoid the impact of bid-ask spreads and short-term reversal effects.)<\/li>\n\n\n\n<li>Precise stock data from the recording month and start a new cycle.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>Exit conditions in the recording month (exit uniformly in the recording month):\n<ul class=\"wp-block-list\">\n<li>Exit long positions when the short-term MAD &gt; long-term MAD.<\/li>\n\n\n\n<li>Exit short positions when the short-term MAD &lt; long-term MAD.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Editing_Environment_and_Module_Requirements\"><\/span>Editing Environment and Module Requirements<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>This article uses MacOS and Jupyter Notebook as the editor.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Data Importation<\/h3>\n\n\n\n<p>The data period ranges from 2018-02-01 to 2023-12-31. Forty stocks are randomly selected, and the <em><strong>Taiwan Weighted Index (IX0001)<\/strong><\/em> is included as the market benchmark.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Establishing_the_Daily_Trading_Strategy\"><\/span>Establishing the Daily Trading Strategy<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\">Creating the Pipeline and Custom Factor Function<\/h3>\n\n\n\n<p>The Custom Factor allows users to design their desired customized factors. In this case, we will use it to handle:<br>A 3-month momentum factor (<code>Momentum<\/code>, details can be found in <a href=\"https:\/\/github.com\/tejtw\/TQuant-Lab\/blob\/main\/lecture\/Custom%20Factors.ipynb\" class=\"ek-link\" target=\"_blank\" rel=\"noopener\">Custom Factors<\/a>).<\/p>\n\n\n\n<p>The <code>Pipeline()<\/code> function allows users to quickly process quantitative indicators and price-volume data for multiple targets. In this case, we will use it to handle:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Calculate the MAD indicator as an exit condition (built-in factor: <code>WeightedMovingAbsDev<\/code>; details can be found in <a href=\"https:\/\/github.com\/tejtw\/TQuant-Lab\/blob\/main\/lecture\/Pipeline%20built-in%20factors.ipynb\" class=\"ek-link\" target=\"_blank\" rel=\"noopener\">Pipeline built-in factors<\/a>).<\/li>\n\n\n\n<li>The <code>window_length<\/code> MAD is set to 21 days for the short term and 120 days for the long term.<\/li>\n\n\n\n<li>When <code>High<\/code> is <code>True<\/code>, it indicates the top 8 performing stocks in terms of returns, whereas when Low is True, it indicates the bottom eight performing stocks. (Users can choose to trade only two stocks per 5% of the 40 stocks, but expanding the stock pool is recommended; otherwise, the number of traded stocks will be too small. Here, we will calculate using eight stocks each.)<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-image size-full caption-align-center\"><img decoding=\"async\" width=\"763\" height=\"611\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/image-407.png\" alt=\"Momentum Factor Strategy\" class=\"wp-image-21494\" srcset=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/image-407.png 763w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-407-300x240.png 300w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-407-150x120.png 150w\" sizes=\"(max-width: 763px) 100vw, 763px\" \/><figcaption class=\"wp-element-caption\">Pipeline information in 2023\/12\/29<\/figcaption><\/figure>\n\n\n\n<div style=\"border: 1px black; border-style: solid none; text-align: center; border-color: #296580; padding: 24px; margin-top: 24px; margin-bottom: 24px;\">\n<p style=\"margin: 0px; font-size: 24px; font-weight: bold; line-height: 1.5;\">Start Building Portfolios That Outperform the Market!<\/p>\n<div style=\"margin-top: 32px;\"><strong><a style=\"border: none; border-radius: 4px; background-color: #296580; color: white; font-size: 20px; width: fit-content; text-decoration: none; padding: 12px 30px 12px 30px;\" href=\"https:\/\/www.tejwin.com\/en\/databank-solution\/market-data\/\">TEJ Market Databank<\/a><\/strong><\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Creating_the_trading_environment\"><\/span>Creating the trading environment<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The initialize() Function is used to define the daily trading environment before the start of trading. In this example, we set:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Slippage cost<\/li>\n\n\n\n<li>Commission fees<\/li>\n\n\n\n<li><em>Taiwan Weighted Index<\/em>(<em>IX0001<\/em>) as the benchmark index<\/li>\n\n\n\n<li>Integrating the momentum factor strategy designed using Pipeline into the trading process<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Creating_the_trading_strategy\"><\/span>Creating the trading strategy<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The <code>handle_data()<\/code> function is critical for constructing the price momentum factor strategy. It is called daily after the start of backtesting and is mainly responsible for setting trading strategies, placing orders, and recording trading information.<\/p>\n\n\n\n<p>For detailed trading rules of this strategy, please refer to <a href=\"https:\/\/github.com\/tejtw\/TEJAPI_Python_Medium_DataAnalysis\/blob\/main\/%E5%8B%95%E8%83%BD%E5%9B%A0%E5%AD%90.ipynb\" class=\"ek-link\" target=\"_blank\" rel=\"noopener\">Momentum Factor.ipynb<\/a><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Executing_the_Trading_Strategy\"><\/span>Executing the Trading Strategy<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><code>Run_algorithm() <\/code>is used to execute the momentum factor strategy as configured. The trading period is set from start_dt (2018-02-01) to end_dt (2023-12-31), using the dataset tquant, with initial capital of ten million dollars. The output results represent daily performance and trading details.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full caption-align-center\"><img loading=\"lazy\" decoding=\"async\" width=\"1292\" height=\"663\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/\u622a\u5716-2024-03-01-\u4e0b\u53481.33.25.png\" alt=\"Momentum Factor Strategy\" class=\"wp-image-21323\" srcset=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/\u622a\u5716-2024-03-01-\u4e0b\u53481.33.25.png 1292w, https:\/\/www.tejwin.com\/wp-content\/uploads\/\u622a\u5716-2024-03-01-\u4e0b\u53481.33.25-300x154.png 300w, https:\/\/www.tejwin.com\/wp-content\/uploads\/\u622a\u5716-2024-03-01-\u4e0b\u53481.33.25-1024x525.png 1024w, https:\/\/www.tejwin.com\/wp-content\/uploads\/\u622a\u5716-2024-03-01-\u4e0b\u53481.33.25-150x77.png 150w, https:\/\/www.tejwin.com\/wp-content\/uploads\/\u622a\u5716-2024-03-01-\u4e0b\u53481.33.25-768x394.png 768w\" sizes=\"(max-width: 1292px) 100vw, 1292px\" \/><figcaption class=\"wp-element-caption\">Trading Details<\/figcaption><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Performance_Evaluation_Using_Pyfolio\"><\/span>Performance Evaluation Using Pyfolio<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<figure class=\"wp-block-image size-full caption-align-center\"><img loading=\"lazy\" decoding=\"async\" width=\"1614\" height=\"867\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/2024\u5e743\u67081\u65e5\u622a\u5716\u4e0b\u53481.28.jpg\" alt=\"Momentum Factor Strategy\" class=\"wp-image-21313\" srcset=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/2024\u5e743\u67081\u65e5\u622a\u5716\u4e0b\u53481.28.jpg 1614w, https:\/\/www.tejwin.com\/wp-content\/uploads\/2024\u5e743\u67081\u65e5\u622a\u5716\u4e0b\u53481.28-300x161.jpg 300w, https:\/\/www.tejwin.com\/wp-content\/uploads\/2024\u5e743\u67081\u65e5\u622a\u5716\u4e0b\u53481.28-1024x550.jpg 1024w, https:\/\/www.tejwin.com\/wp-content\/uploads\/2024\u5e743\u67081\u65e5\u622a\u5716\u4e0b\u53481.28-150x81.jpg 150w, https:\/\/www.tejwin.com\/wp-content\/uploads\/2024\u5e743\u67081\u65e5\u622a\u5716\u4e0b\u53481.28-768x413.jpg 768w, https:\/\/www.tejwin.com\/wp-content\/uploads\/2024\u5e743\u67081\u65e5\u622a\u5716\u4e0b\u53481.28-1536x825.jpg 1536w\" sizes=\"(max-width: 1614px) 100vw, 1614px\" \/><figcaption class=\"wp-element-caption\">Backtesting Performance Compared to Benchmark<\/figcaption><\/figure>\n\n\n\n<p>We can see that <mark style=\"background-color:rgba(0, 0, 0, 0);color:#0763e3\" class=\"has-inline-color\">the momentum factor strategy achieved an annualized return of approximately 16.56% over these 68 months, with a cumulative return of 140.25%<\/mark>. The profit performance is quite impressive. However, relative to the strategy&#8217;s characteristics, there may be a lag in entry. For example, we cannot immediately follow up on stocks with good performance this month; instead, we must wait for some time to buy in. Therefore, missing the entry point may be the reason for the performance discrepancy between Q1 and Q2 of 20 years compared to the benchmark. However, this lagging effect may also bring more excess returns to the strategy. For example, when the market sentiment in a particular sector improves, the strategy has already bought in due to its previous good momentum, equivalent to early positioning. Therefore, it is speculated that such significant outperformance occurred in the second half of 21 and 23 years. However, regarding the lagging issue, we can complement it with indicators such as RSI (<a href=\"https:\/\/www.tejwin.com\/insight\/rsi-%e5%9d%87%e7%b7%9a%e7%ad%96%e7%95%a5\/\" class=\"ek-link\">TQuant Lab RSI moving average strategy<\/a>) or volatility-related indicators, which can be further explored.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full caption-align-center\"><img loading=\"lazy\" decoding=\"async\" width=\"1344\" height=\"435\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/\u622a\u5716-2024-03-01-\u4e0b\u53481.54.55.png\" alt=\"Momentum Factor Strategy\" class=\"wp-image-21329\" srcset=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/\u622a\u5716-2024-03-01-\u4e0b\u53481.54.55.png 1344w, https:\/\/www.tejwin.com\/wp-content\/uploads\/\u622a\u5716-2024-03-01-\u4e0b\u53481.54.55-300x97.png 300w, https:\/\/www.tejwin.com\/wp-content\/uploads\/\u622a\u5716-2024-03-01-\u4e0b\u53481.54.55-1024x331.png 1024w, https:\/\/www.tejwin.com\/wp-content\/uploads\/\u622a\u5716-2024-03-01-\u4e0b\u53481.54.55-150x49.png 150w, https:\/\/www.tejwin.com\/wp-content\/uploads\/\u622a\u5716-2024-03-01-\u4e0b\u53481.54.55-768x249.png 768w\" sizes=\"(max-width: 1344px) 100vw, 1344px\" \/><figcaption class=\"wp-element-caption\">Monthly Return Variation Chart<\/figcaption><\/figure>\n\n\n\n<figure class=\"wp-block-image size-full caption-align-center\"><img loading=\"lazy\" decoding=\"async\" width=\"1353\" height=\"832\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/\u7167\u7247\u5408\u4f75-2024-03-01-\u4e0b\u53482.08.jpg\" alt=\"Momentum Factor Strategy\" class=\"wp-image-21333\" srcset=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/\u7167\u7247\u5408\u4f75-2024-03-01-\u4e0b\u53482.08.jpg 1353w, https:\/\/www.tejwin.com\/wp-content\/uploads\/\u7167\u7247\u5408\u4f75-2024-03-01-\u4e0b\u53482.08-300x184.jpg 300w, https:\/\/www.tejwin.com\/wp-content\/uploads\/\u7167\u7247\u5408\u4f75-2024-03-01-\u4e0b\u53482.08-1024x630.jpg 1024w, https:\/\/www.tejwin.com\/wp-content\/uploads\/\u7167\u7247\u5408\u4f75-2024-03-01-\u4e0b\u53482.08-150x92.jpg 150w, https:\/\/www.tejwin.com\/wp-content\/uploads\/\u7167\u7247\u5408\u4f75-2024-03-01-\u4e0b\u53482.08-768x472.jpg 768w\" sizes=\"(max-width: 1353px) 100vw, 1353px\" \/><figcaption class=\"wp-element-caption\">Long and Short Position Exposure Chart and Number of Holdings<\/figcaption><\/figure>\n\n\n\n<p>The total amount of long positions is more significant than that of short positions, but there are more trading stocks in short positions.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>This strategy applies the conclusion of\u00a0<a href=\"https:\/\/www.tejwin.com\/en\/news\/the-relationship-between-stock-price-momentum-and-expected-return\/\" target=\"_blank\" rel=\"noreferrer noopener\">The Relationship between Price Momentum and Expected Stock Returns.<\/a>\u00a0and simulates backtesting based on the concept of momentum factor: &#8220;Stocks with good past performance are likely to perform well in the future, and vice versa,&#8221; <mark style=\"background-color:rgba(0, 0, 0, 0);color:#0763e3\" class=\"has-inline-color\">verifying the profitability of &#8220;the strong get stronger, and the weak get weaker&#8221; in the Taiwan stock market.<\/mark> Investors are welcome to refer to it. In the future, we will continue introducing various indicators using the TEJ database and backtesting their performance. Therefore, readers interested in various trading backtesting scenarios are welcome to purchase relevant solutions from\u00a0<mark style=\"background-color:#ffdc7d\" class=\"has-inline-color\"><strong><a href=\"https:\/\/www.tejwin.com\/en\/databank-solution\/market-data\/\" class=\"ek-link\">TEJ Market Data<\/a><\/strong>\u00a0<\/mark>to construct their trading strategies using high-quality databases.<\/p>\n\n\n\n<p>This is a gentle reminder that <strong>this strategy is for reference only and does not represent advice on commodities or investments.<\/strong><\/p>\n\n\n\n<div class=\"wp-block-buttons is-layout-flex wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button has-custom-width wp-block-button__width-100 has-custom-font-size\" style=\"font-size:20px\"><a class=\"wp-block-button__link has-background wp-element-button\" href=\"https:\/\/www.tejwin.com\/en\/databank-solution\/market-data\/\" style=\"border-radius:16px;background:linear-gradient(135deg,rgb(249,226,133) 0%,rgb(117,217,184) 50%,rgb(47,131,183) 100%)\"><strong>Access to Comprehensive Stock Market Data<\/strong><br><strong>Start Building Portfolios That Outperforms the Market Today!<\/strong><\/a><\/div>\n<\/div>\n\n\n\n<div style=\"height:22px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p class=\"has-text-align-center\" style=\"font-size:32px\"><strong><em><mark style=\"background-color:rgba(0, 0, 0, 0);color:#0763e3\" class=\"has-inline-color\">&#8220;Taiwan stock market data, TEJ collect it all.&#8221;<\/mark><\/em><\/strong><\/p>\n\n\n\n<p>The characteristics of the Taiwan stock market differ from those of other European and American markets. Especially in the first quarter of 2024, with the <strong><mark style=\"background-color:rgba(0, 0, 0, 0);color:#c05d5d\" class=\"has-inline-color\">Taiwan Stock Exchange reaching a new high of 20,000 points<\/mark><\/strong> due to the rise in TSMC&#8217;s stock price, global institutional investors are paying more attention to the performance of the Taiwan stock market.\u00a0<\/p>\n\n\n\n<p><strong><mark style=\"background-color:rgba(0, 0, 0, 0);color:#0763e3\" class=\"has-inline-color\">Taiwan Economical Journal (TEJ)<\/mark><\/strong>, a financial database established in Taiwan for over 30 years, serves local financial institutions and academic institutions, and has long-term cooperation with internationally renowned data providers, providing high-quality financial data for five financial markets in Asia.\u00a0<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong><mark style=\"background-color:#ebc766\" class=\"has-inline-color has-black-color\">Complete Coverage<\/mark><\/strong>: Includes all listed companies on stock markets in Taiwan, China, Hong Kong, Japan, Korea, etc.&nbsp;<\/li>\n\n\n\n<li><strong><mark style=\"background-color:#ebc766\" class=\"has-inline-color\">Comprehensive Analysis of Enterprises<\/mark><\/strong>: Operational aspects, financial aspects, securities market performance, ESG sustainability, etc.&nbsp;<\/li>\n\n\n\n<li><strong><mark style=\"background-color:#ebc766\" class=\"has-inline-color\">High-Quality Database<\/mark><\/strong>: TEJ data is cleaned, checked, enhanced, and integrated to ensure it meets the information needs of financial and market analysis.&nbsp;<\/li>\n<\/ul>\n\n\n\n<p>With TEJ&#8217;s assistance, you can access relevant information about major stock markets in Asia, such as <span style=\"text-decoration: underline;\" class=\"ek-underline\">securities market, financials data, enterprise operations, board of directors, sustainability data<\/span>, etc., providing investors with timely and high-quality content. Additionally, TEJ offers advisory services to help solve problems in theoretical practice and financial management!<\/p>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-a89b3969 wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button has-custom-width wp-block-button__width-100 has-custom-font-size\" style=\"font-size:20px\"><a class=\"wp-block-button__link has-background has-text-align-center wp-element-button\" href=\"https:\/\/www.tejwin.com\/en\/contact\/\" style=\"border-radius:16px;background:linear-gradient(135deg,rgb(249,226,133) 0%,rgb(117,217,184) 50%,rgb(47,131,183) 100%)\"><strong>Want to Learn More About Our Databases?<br>Contact Us and Get the Free Trial!<\/strong><\/a><\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Extended_Reading\"><\/span>Extended Reading<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/www.tejwin.com\/en\/insight\/buffetts-business-investment-rules\/\" class=\"ek-link\">TQuant Lab Warren E. Buffett&#8217;s Business Investment Rules<\/a><\/li>\n\n\n\n<li><a href=\"https:\/\/www.tejwin.com\/en\/news\/the-relationship-between-stock-price-momentum-and-expected-return\/\" class=\"ek-link\">The Relationship between Price Momentum and Expected Stock Returns.<\/a><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>This momentum factor strategy utilizes the concept of momentum factor: &#8220;stocks with good past performance are likely to perform well in the future, and vice versa&#8221; to simulate backtesting and to verify the profitability of &#8220;the strong get stronger, and the weak get weaker&#8221; in the Taiwan stock market.<\/p>\n","protected":false},"featured_media":20902,"template":"","tags":[2572,2371,2988,2388,2537],"insight-category":[690,50,1356],"class_list":["post-21498","insight","type-insight","status-publish","has-post-thumbnail","hentry","tag-data-analysis","tag-python","tag-quantitative-analysis","tag-tquant-lab","tag-2537","insight-category-data-analysis","insight-category-fintech","insight-category-tquant-lab-en"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/insight\/21498","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/insight"}],"about":[{"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/types\/insight"}],"version-history":[{"count":10,"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/insight\/21498\/revisions"}],"predecessor-version":[{"id":24353,"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/insight\/21498\/revisions\/24353"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/media\/20902"}],"wp:attachment":[{"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/media?parent=21498"}],"wp:term":[{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/tags?post=21498"},{"taxonomy":"insight-category","embeddable":true,"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/insight-category?post=21498"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}