Momentum and the Cross-Section of Stock Volatility

Fan, Minyou; Kearney, Fearghal; Li, Youwei; Liu, Jiadong

doi:10.2139/ssrn.3541766

Cited by 4 publications

(6 citation statements)

References 80 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…It better informs policy makers to improve market stability and efficiency. Investors can also improve the performance of momentum strategy and better implement and manage the risk associated with the momentum strategy by diversifying it with value investment (Asness et al, 2014), and combining it with risk-adjusted momentum (Fan et al, 2020).…”

Section: Discussionmentioning

confidence: 99%

“…Motivated by Grundy and Martin's (2001) finding, Blitz et al (2011) show that the residual momentum strategy, developed by hedging out the Fama-French (1993) three factors perform significantly better than traditional momentum in the U.S because time-varying exposures to Fama-French factors are alleviated as residual returns are used as ranking variables to form the portfolios. Recently, Fan et al (2020) find that the high uncertainty of momentum strategies results from the cross-sectional volatility of individual stocks. Stocks with high realized volatility over the formation period tend to lose momentum effect, while stocks with low realized volatility show a strong momentum.…”

Section: Momentum Crashes By Candidate Componentsmentioning

confidence: 99%

“…Chang et al (2018) find that such a strategy is significantly profitable in Japan and attributes it to investor underreaction. This study offers an alternative approach of the residual momentum developed by hedging out all momentum candidate variables that alleviate momentum crashes, such as Fan et al (2020).…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

What Can Explain Momentum? Evidence From Decomposition

Guo¹,

2020

SSRN Journal

Self Cite

View full text Add to dashboard Cite

This study comprehensively evaluates and ranks a large number of competing explanations for the momentum anomaly. As a benchmark for evaluation, firm fundamentals are found to be the most promising among well-known explanations of momentum, followed by prospect theory and mental accounting, and anchoring effect. Collectively, all explanations capture 31% of momentum, while 69% of momentum remains unexplained. This study thoroughly examines what fractions of the momentum anomaly emerge from the interaction effects between past returns and various firms' characteristics. It is further found that strategies based on firm characteristics and residual momentum can significantly alleviate the severity of momentum crashes. Finally, robustness analysis is provided for choosing different formation and holding periods, excluding January observations, and analyze at the level of portfolio rather than individual stock.

show abstract

Section: Discussionmentioning

confidence: 99%

Section: Momentum Crashes By Candidate Componentsmentioning

confidence: 99%

See 1 more Smart Citation

What Can Explain Momentum? Evidence From Decomposition

Guo¹,

2020

SSRN Journal

Self Cite

View full text Add to dashboard Cite

show abstract

“…Another study in America by Bhattacharya et al (2017) that American stock market revealed that the use of the momentum strategy did not provide significant returns due to macroeconomic factors and the market being more efficient. Fan, Kearney et al (2020) Bursa in London found that the use of the momentum strategy has high uncertainty, which allows the opportunity to get a return to be lost. Berggrun et al (2020) Stock exchanges in Latin American countries finds that the return expected by investors is only possible when investors control the influence of market size and value.…”

Section: Introductionmentioning

confidence: 99%

Do Domestic Investors with the Smallest Trading Orders Use Momentum Strategies in The IDX?

Syamni

Wardhiah

Majid

et al. 2021

Int. res. j. bus. stud.

View full text Add to dashboard Cite

This study aims to examine the use of the momentum strategy of domestic investors who trade small order sizes on IDX. The data used in this study is intraday trade transaction data from the LQ 45 Index for March, April and May 2017 obtained from The Indonesia Capital Market Institute. The method of data analysis used is the market-adjusted model approach. The results of this study indicate that domestic investors who trade in small order sizes tend to use the momentum strategy in government and non-government stock issuers. This finding implies that when IDX is in a good performance, investors should take advantage of this condition because buying stocks that have already been performing well provides a significant short-term abnormal return.

show abstract

mentioning

confidence: 99%

What Can Explain Momentum? Evidence from Decomposition

Guo

2022

Management Science

Self Cite

View full text Add to dashboard Cite

This study comprehensively evaluates and ranks a large number of competing explanations for the momentum anomaly. As a benchmark for evaluation, firm fundamentals are found to be the most promising among well-known explanations of momentum, followed by prospect theory and mental accounting, and anchoring effect. Collectively, all explanations capture 31% of momentum, whereas 69% of momentum remains unexplained. This study thoroughly examines what fractions of the momentum anomaly emerge from the interaction effects between past returns and various firm characteristics. It is further found that strategies based on firm characteristics and residual momentum can significantly alleviate the severity of momentum crashes. Finally, robustness analysis is provided for choosing different formation and holding periods, excluding January observations, and analyze at the level of portfolio rather than individual stock. This paper was accepted by David Simchi-Levi, finance.

show abstract

Momentum and the Cross-Section of Stock Volatility

Cited by 4 publications

References 80 publications

What Can Explain Momentum? Evidence From Decomposition

What Can Explain Momentum? Evidence From Decomposition

Do Domestic Investors with the Smallest Trading Orders Use Momentum Strategies in The IDX?

What Can Explain Momentum? Evidence from Decomposition

Contact Info

Product

Resources

About