Cross-Asset Analysis The Impact of Value and Momentum Strategies

Abstract

This thesis performs a comprehensive analysis of momentum and value strategies across four asset classes, identifying a consistent decline in momentum returns relative to historical performance. The study demonstrates robustness of value and momentum in combination. Cross-asset correlations are identified, which challenge conventional co-movement frameworks and factor structures. We present compelling evidence of an improved Sharpe ratio for the zero-cost long-short portfolio of Global Equity Indices. By modifying the portfolio's weighting, we substantially increase returns for the combined factor portfolio of commodities. We find evidence of a persisting factor structure across all asset classes, excluding currencies, supported by the correlation between assets. Our empirical results provide new evidence of a negative correlation between the VIX index and momentum, with diminishing effect over time. These findings suggest incorporating market volatility in strategies could result in increased momentum returns, encouraging further research to develop a comprehensive momentum prediction model.