Enhancing Momentum Strategies with Fundamentals

The Impact of Free Cash Flow Yields

Introduction

Combining price-based momentum strategies with fundamental information has the potential to significantly enhance risk-adjusted returns. In this blog post, I focus on the specific impact of free cash flow yields on investment performance. I review relevant research and demonstrate how information on cash flow can be effectively integrated into momentum strategies, leading to substantial improvements in Sharpe ratios and reductions in drawdowns.

Table of Contents

1. Introduction

2. Background

3. Empirical Analysis

   • Data

   • Strategies

   • Results

4. Investor Takeaways

5. References