Risk Premia Harvesting Through Dual Momentum

Abstract:     
Momentum is the premier market anomaly. It is nearly universal in its applicability. This paper examines cross-asset momentum with respect to what can make it most effective for momentum investors. We explore price volatility as a value-adding factor. We show that both absolute and relative momentum can enhance returns, but that absolute momentum does far more to lessen volatility and drawdown. We see that combining absolute and relative momentum gives the best results. Finally, we show how asset modules can serve as diversification building blocks that allow us to easily combine relative with absolute momentum and capture risk premia profits.

Number of Pages in PDF File: 37

Keywords: momentum, market anomalies, momentum strategies, momentum investing, trend following

JEL Classification: C10, G10, G11, G14, G15

working papers series