Abstract
Since the discovery of momentum effect, people have started the journey of using the momentum effect to construct momentum strategies. As a result of coupling cross-sectional and time-series momentum strategy, dual momentum strategy (DM strategy) has been widely used in practice and closely followed by academics. To address the shortcoming of the classical DM strategy that has not considered the multi-fractal characteristics of the stock market, we construct the fractal dual momentum strategy (FDM strategy) from the two aspects of optimizing the ranking index of the cross-sectional momentum strategy by using fractal statistical measures and improving the timing selection of the time-series momentum strategy by using the trend entropy dimension. The empirical results show that the FDM strategy outperforms the DM strategy. Both in terms of the size and stability of the strategy returns, the FDM strategy shows an optimization effect compared with the DM strategy, which is beneficial to provide investors with better decision-making references.
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