Abstract

https://ssrn.com/abstract=2632705
 
 

Citations (12)



 


 



Momentum Crashes


Kent D. Daniel


Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Tobias J. Moskowitz


AQR Capital; University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

August 8, 2014

Chicago Booth Research Paper No. 15-22

Abstract:     
Despite their strong positive average returns across numerous asset classes, momentum strategies can experience infrequent and persistent strings of negative returns. These momentum crashes are partly forecastable. They occur in “panic” states – following market declines and when market volatility is high – and are contemporaneous with market rebounds. We show that the low ex-ante expected returns in panic states are consistent with a conditionally high premium attached to the option-like payoffs of past losers. An implementable dynamic momentum strategy based on forecasts of momentum’s mean and variance approximately doubles the alpha and Sharpe Ratio of a static momentum strategy, and is not explained by other factors. These results are robust across multiple time periods, international equity markets, and other asset classes.

Number of Pages in PDF File: 52


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Date posted: July 19, 2015 ; Last revised: July 21, 2015

Suggested Citation

Daniel, Kent D. and Moskowitz, Tobias J., Momentum Crashes (August 8, 2014). Chicago Booth Research Paper No. 15-22. Available at SSRN: https://ssrn.com/abstract=2632705 or http://dx.doi.org/10.2139/ssrn.2632705

Contact Information

Kent D. Daniel
Columbia Business School - Finance and Economics ( email )
3022 Broadway
New York, NY 10027
United States
212-854-4679 (Phone)
212-854-4679 (Fax)
HOME PAGE: http://www.columbia.edu/~kd2371/

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Tobias J. Moskowitz (Contact Author)
AQR Capital ( email )
Greenwich, CT
United States

University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-834-2757 (Phone)
773-702-0458 (Fax)

Chicago Booth School of Business Logo

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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