Deploying a monthly factor portfolio strategy
We’ll now integrate the momentum factor we built in Chapter 5, Build Alpha Factors for Stock Portfolios, into our trading app. The app is designed to download and process premium U.S. equities data encompassing a comprehensive universe of approximately 20,000 stocks. The advantage of using the premium data is that it lets us build factor portfolios that include the entire universe of U.S.-traded equities.
The trading app is designed to be run on a periodic rebalancing schedule after market hours, typically monthly. Each time it runs, it acquires the latest price data for the entire stock universe. It then computes the momentum factor for these stocks. Based on this computation, the app identifies the top stocks exhibiting the strongest momentum and the bottom stocks showing the weakest momentum. The trading strategy involves going long on the top stocks and short on the bottom stocks.
Our trading app can execute orders that...
