Asymmetric Extreme Tails and Prospective Utility of Momentum Returns

9 Pages Posted: 23 Sep 2010 Last revised: 7 May 2012

See all articles by Russell B. Gregory-Allen

Russell B. Gregory-Allen

Massey University - Department of Commerce

Helen Lu

University of Auckland - Department of Accounting and Finance

Philip A. Stork

Vrije Universiteit Amsterdam, School of Business and Economics; Tinbergen Institute

Date Written: September 22, 2010

Abstract

We use extreme value theory to analyse the tails of a momentum strategy’s return distribution. The asymmetry between the fat left tail and thin right tail strongly reduces a momentum strategy’s prospective utility levels.

Keywords: Extreme value theory, Asymmetric tails, Prospective utility

JEL Classification: G11, G12, G14

Suggested Citation

Gregory-Allen, Russell B. and Lu, Helen and Stork, Philip A., Asymmetric Extreme Tails and Prospective Utility of Momentum Returns (September 22, 2010). Economics Letters, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1681227 or http://dx.doi.org/10.2139/ssrn.1681227

Russell B. Gregory-Allen

Massey University - Department of Commerce ( email )

Auckland
New Zealand

Helen Lu

University of Auckland - Department of Accounting and Finance ( email )

Private Bag 92019
Auckland 1001
New Zealand

Philip A. Stork (Contact Author)

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

Tinbergen Institute ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

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