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Momentum? What Momentum?
Theissen, Erik
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Yilanci, Can
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URL:
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https://www.econstor.eu/handle/10419/226389
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Dokumenttyp:
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Präsentation auf Konferenz
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Erscheinungsjahr:
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2021
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Veranstaltungstitel:
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37th International Conference of the French Finance Association (AFFI)
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Veranstaltungsort:
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Online
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Veranstaltungsdatum:
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26.-28.05.2021
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Sprache der Veröffentlichung:
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Englisch
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Einrichtung:
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Fakultät für Betriebswirtschaftslehre > ABWL u. Finanzierung (Theissen 2009-)
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Fachgebiet:
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330 Wirtschaft
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Abstract:
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Risk-adjusted momentum returns are usually estimated by sorting stocks into a regularly rebalanced long-short portfolio based on their prior return and then running a full-sample regression of the portfolio returns on a set of factors (portfolio-level risk adjustment). This approach implicitly assumes constant factor exposure of the momentum portfolio. However, momentum portfolios are characterized by high turnover and time-varying factor exposure. We propose to estimate the risk exposure at the stock-level. The risk-adjusted return of the momentum portfolio in month t then is the actual return minus the weighted average of the expected returns of the component stocks (stock-level risk adjustment). Based on evidence from the universe of CRSP stocks, from momentum returns conditional on market states, from volatility-scaled momentum strategies (Barroso and Santa-Clara 2015), from sub-periods and size-based sub-samples, and from an international sample covering 20 developed countries, we conclude that the momentum effect may be much weaker than previously thought.
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