A momentum strategy using leveraged ETFs
View/
Keywords
Momentum strategy ; Leveraged ETFs ; Principal Component Analysis (PCA) ; Market regimes ; Tactical asset allocationAbstract
This thesis examines a dynamic investment strategy based on momentum, utilizing Leveraged Exchange-Traded Funds (LETFs) with the aim of enhancing portfolio performance. Additionally, the strategy incorporates market regime detection through Principal Component Analysis (PCA), which combines multiple signals, such as spread-based momentum indicators and the Volatility Risk Premium (VRP) into a single composite risk signal (PC1). Initially, this signal classifies the market into three regimes: risk-on, neutral regime, and risk-off. Specifically, during risk-on periods, capital is allocated to the top three performing U.S. sector ETFs based on their 3-month momentum. In contrast, during risk-off periods, funds are allocated to one or two defensive ETFs, while in neutral regimes, capital is distributed 50%-50% between risk-on and risk-off assets (ETFs). Therefore, the sector selection is based on unleveraged ETFs, while the strategy is extended by using their corresponding leveraged versions (2x or 3x). The historical performance of both leveraged and unleveraged strategies is compared to the SPY ETF, and the results indicate superior risk-adjusted returns and a higher Sharpe ratio. Finally, it is worth noting that, for the unleveraged strategy, the statistical superiority of its Sharpe ratio over that of SPY is confirmed.
Postgraduate Studies Programme
Χρηματοοικονομική και Τραπεζική με ειδίκευση στη Χρηματοοικονομική και Τραπεζική ΔιοικητικήDepartment
Σχολή Χρηματοοικονομικής και Στατιστικής. Τμήμα Χρηματοοικονομικής και Τραπεζικής ΔιοικητικήςNumber of pages
61Language
English
Except where otherwise noted, this item's license is described as
Αναφορά Δημιουργού-Μη Εμπορική Χρήση-Όχι Παράγωγα Έργα 3.0 Ελλάδα
Αναφορά Δημιουργού-Μη Εμπορική Χρήση-Όχι Παράγωγα Έργα 3.0 Ελλάδα