Momentum Factor or Factor Momentum in REITs Market?

Александр Томтосов; Светлана Речмедина; Виктория Добрынская

Александр Томтосов Национальный исследовательский университет «Высшая школа экономики», НИУ ВШЭ
Светлана Речмедина Национальный исследовательский университет «Высшая школа экономики», НИУ ВШЭ
Виктория Добрынская Национальный исследовательский университет «Высшая школа экономики», НИУ ВШЭ

Аннотация

We study the application of factor investing in the market for real estate (REITs). The analysis of traditional factor strategies, such as momentum, value, size and profitability, reveals their unstable and atypical behavior in comparison to the equity market, however, there is a strong momentum effect in the factor strategies. We propose a new dynamic strategy, which is based on the factor momentum effect. The strategy buys the factor portfolios with the best past performance and sells short the factor portfolios with the worst past performance, with monthly rebalancing. The factor momentum strategy yields a significant positive average return and alpha of about 6% pa, it has high Sharpe and Sortino ratios. The strategy outperforms all traditional single-factor strategies in different market states and sub-periods. The superior returns in adverse market conditions makes it particularly attractive.

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