Course Name: Day Trading Strategies for Beginners, Section No: 6, Unit No: 1, Unit type: Video
Why longer time horizon of momentum behavior leads to lower Sharpe ratio and underperformance after finanvial crisis?
Hi Levi,
Although answering this question may require conducting empirical analysis, I will try to give an answer.
I can say that momentum trading strategies suffer from negative returns especially during market crashes due to high volatility. Since the possibility of experiencing a high volatility environment increases as the time horizon widens, a momentum strategy may produce lower Sharpe ratio for a longer time horizon.
Hope this helps.
Hi Suleyman,
I am appreciative for your response. It really helps.