The Idiosyncratic Momentum Anomaly

60 Pages Posted: 5 Apr 2017 Last revised: 8 Apr 2020

See all articles by David Blitz

David Blitz

Robeco Quantitative Investments

Matthias X. Hanauer

Technische Universität München (TUM); Robeco Asset Management

Milan Vidojevic

Northern Trust Corporation - Northern Trust Asset Management

Date Written: April 7, 2020

Abstract

This paper seeks to uncover the drivers of the idiosyncratic momentum anomaly. We show that: (I) idiosyncratic momentum is a distinct phenomenon that exists next to conventional momentum and is not explained by it; (ii) idiosyncratic momentum is priced in the cross-section of stock returns after controlling for established and recently proposed asset pricing factors, including the ones that explain a host of momentum-related anomalies; (iii) some of the prominent explanations for the momentum premium, such as crash risk, and investor overconfidence and overreaction linked to market states and dynamics cannot explain idiosyncratic momentum profits; (iv) long-term return dynamics of idiosyncratic momentum support the underreaction hypothesis for its existence; (v) idiosyncratic momentum generates robust returns across a range of developed and emerging markets.

Keywords: asset pricing, idiosyncratic momentum, momentum crashes, risk management

JEL Classification: G11, G12, G14

Suggested Citation

Blitz, David and Hanauer, Matthias Xaver and Vidojevic, Milan, The Idiosyncratic Momentum Anomaly (April 7, 2020). Available at SSRN: https://ssrn.com/abstract=2947044 or http://dx.doi.org/10.2139/ssrn.2947044

David Blitz

Robeco Quantitative Investments ( email )

Weena 850
Rotterdam, 3014 DA
Netherlands

Matthias Xaver Hanauer

Technische Universität München (TUM) ( email )

Arcisstr. 21
Munich, D-80290
Germany

HOME PAGE: http://www.professors.wi.tum.de/fm/team/researcher/dr-matthias-hanauer-cfa/

Robeco Asset Management ( email )

Weena 850
Rotterdam, 3014 DA
Netherlands

HOME PAGE: http://www.robeco.com/en-int/about-us/matthias-hanauer

Milan Vidojevic (Contact Author)

Northern Trust Corporation - Northern Trust Asset Management ( email )

50 South LaSalle Street
Chicago, IL 60603
United States

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