In this report, quantitative analysts Michael Barasciutti, Veronica Larsson, Marko Malling and Noah Åkesson explore the idea that a positive relationship can be located between share turnover and momentum. The analysis is conducted on the basis of data from 2000 to 2020 for the S&P 500 universe. The results of the report line up with the general expectations from relevant literature and indicate that it is possible to generate gains in the market by constructing groups based on share turnover to determine which stocks to purchase.
Presentable returns are generated for one short-term momentum strategy and one conventional momentum strategy. In the conventional momentum case, the strategy outperforms the buy-and-hold benchmark. Although the approach presented in the report is not profitable for the entirety of the observed time period, it generates constant gains since 2014. While contextual, time period-specific factors have to be accounted for, the current market circumstances appear favorable for the approaches presented in the report. The report moreover hints that making use of Jenks’ natural breaks as a data clustering method for constructing groups out of market universes may be a viable option.
