Abstract

http://ssrn.com/abstract=2041429
 
 

References (21)



 
 

Citations (2)



 


 



Momentum Has Its Moments


Pedro Barroso


University of Exeter Business School

Pedro Santa-Clara


New University of Lisbon - Nova School of Business and Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

April 9, 2013


Abstract:     
Compared to the market, value or size factors, momentum has offered investors the highest Sharpe ratio. However, momentum has also had the worst crashes, making the strategy unappealing to investors with reasonable risk aversion. We fi…nd that the risk of momentum is highly variable over time and quite predictable. The major source of predictability is not time-varying market risk but rather momentum-specific risk. Managing this risk virtually eliminates crashes and nearly doubles the Sharpe ratio of the momentum strategy. Risk management works because high risk forecasts both high risk and low returns. As a result, risk-managed momentum is a much greater puzzle than the original version.

Number of Pages in PDF File: 36

Keywords: Stock momentum, risk management, anomalies

JEL Classification: G11, G14

working papers series


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Date posted: April 18, 2012 ; Last revised: January 23, 2014

Suggested Citation

Barroso, Pedro and Santa-Clara, Pedro, Momentum Has Its Moments (April 9, 2013). Available at SSRN: http://ssrn.com/abstract=2041429 or http://dx.doi.org/10.2139/ssrn.2041429

Contact Information

Pedro Barroso (Contact Author)
University of Exeter Business School ( email )
Streatham Court
Xfi Building, Rennes Dr.
Exeter, EX4 4JH
United Kingdom
Pedro Santa-Clara
New University of Lisbon - Nova School of Business and Economics ( email )
Lisbon
Portugal
HOME PAGE: http://docentes.fe.unl.pt/~psc/
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Centre for Economic Policy Research (CEPR) ( email )
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
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