07. Quiz: Momentum-based Portfolio

Short Portfolio

Say your stock universe consisted of the tickers below, and you wanted to put 3 stocks in your long portfolio and 3 stocks in your short portfolio. Using the month-end prices x_t , you calculate the momentum indicator log_e{(x_t)}-log_e{(x_{t-1})} for a single month-long period, and get the values shown below.

When we build a portfolio of stocks to short based on the idea of profiting from the momentum effect, we look for poor performers, which we think will continue to perform badly. Which 3 stocks would you short for this month-long period?

SOLUTION:
  • GOOG, -0.047328
  • AMZN, -0.084410
  • M, 0.011036

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