momentum-in-mutual-fund-returns.py

# https://quantpedia.com/strategies/momentum-in-mutual-fund-returns/
#
# The investment universe consists of equity funds from the CRSP Mutual Fund database.
# This universe is then shrunk to no-load funds (to remove entrance fees).
# Investors then sort mutual funds based on their past 6-month return and divide them into deciles.
# The top decile of mutual funds is then picked into an investment portfolio (equally weighted), and funds are held for three months.
# Other measures of momentum could also be used in sorting (fund’s closeness to 1 year high in NAV and momentum factor loading),
# and it is highly probable that the combined predictor would have even better results than only the simple 6-month momentum.
#
# QC Implementation:
#   - Universe consist of approximately 850 mutual funds.

#region imports
from AlgorithmImports import *
#endregion

class MomentuminMutualFundReturns(QCAlgorithm):

    def Initialize(self):
        # NOTE: most of the data start from 2014 and until 2015 there wasn't any trade
        self.SetStartDate(2014, 1, 1)
        self.SetCash(100000)
        
        self.data = {}
        self.symbols = []
        
        self.period = 21 * 6 # Storing 6 months of daily prices
        self.quantile = 10
        
        self.symbol = self.AddEquity('SPY', Resolution.Daily).Symbol
        
        # Load csv file with etf symbols and split line with semi-colon
        etf_symbols_csv = self.Download("data.quantpedia.com/backtesting_data/equity/mutual_funds/symbols.csv")
        splitted_csv = etf_symbols_csv.split(';')
        
        for symbol in splitted_csv:
            self.symbols.append(symbol)
            
            # Subscribe for QuantpediaETF by etf symbol, then set fee model and leverage
            data = self.AddData(QuantpediaETF, symbol, Resolution.Daily)
            data.SetFeeModel(CustomFeeModel())
            data.SetLeverage(5)
            
            self.data[symbol] = RollingWindow[float](self.period)
        
        self.recent_month = -1

    def OnData(self, data):
        # Update daily prices of etfs
        for symbol in self.symbols:
            if symbol in data and data[symbol]:
                price = data[symbol].Value
                self.data[symbol].Add(price)

        if self.recent_month == self.Time.month:
            return
        self.recent_month = self.Time.month

        # Rebalance quarterly
        if self.recent_month % 3 != 0:
            return
            
        performance = {}
        
        for symbol in self.symbols:
            # If data for etf are ready calculate it's 6 month performance
            if self.data[symbol].IsReady:
                if self.Securities[symbol].GetLastData() and (self.Time.date() - self.Securities[symbol].GetLastData().Time.date()).days <= 3:
                    prices = [x for x in self.data[symbol]]
                    performance[symbol] = (prices[0] - prices[-1]) / prices[-1]
                
        if len(performance) < self.quantile:
            self.Liquidate()
            return
        
        decile = int(len(performance) / self.quantile)
        # sort dictionary by performance and based on it create sorted list
        sorted_by_perf = [x[0] for x in sorted(performance.items(), key=lambda item: item[1], reverse=True)]
        # select top decile etfs for investment based on performance
        long = sorted_by_perf[:decile]
        
        # Trade execution
        invested_etfs = [x.Key for x in self.Portfolio if x.Value.Invested]
        for symbol in invested_etfs:
            if symbol not in long:
                self.Liquidate(symbol)
            
        long_length = len(long)
        
        for symbol in long:
            self.SetHoldings(symbol, 1 / long_length)    

# Quantpedia data
# NOTE: IMPORTANT: Data order must be ascending (datewise)
class QuantpediaETF(PythonData):
    def GetSource(self, config, date, isLiveMode):
        return SubscriptionDataSource("data.quantpedia.com/backtesting_data/equity/mutual_funds/{0}.csv".format(config.Symbol.Value), SubscriptionTransportMedium.RemoteFile, FileFormat.Csv)

    def Reader(self, config, line, date, isLiveMode):
        data = QuantpediaETF()
        data.Symbol = config.Symbol
        
        if not line[0].isdigit(): return None
        split = line.split(';')
        
        data.Time = datetime.strptime(split[0], "%d.%m.%Y") + timedelta(days=1)
        data['settle'] = float(split[1])
        data.Value = float(split[1])

        return data

# Custom fee model
class CustomFeeModel(FeeModel):
    def GetOrderFee(self, parameters):
        fee = parameters.Security.Price * parameters.Order.AbsoluteQuantity * 0.00005
        return OrderFee(CashAmount(fee, "USD"))