Momentum with Volatility Timing

18 Pages Posted: 10 Jul 2019

See all articles by Yulia Malitsky

Yulia Malitsky

VKY Analytics, LLC; Université Toulouse I Capitole; Toulouse Business School Research Centre

Date Written: July 9, 2019

Abstract

The growing adoption of factor investing simultaneously prompted the active topic of factor timing approaches for the dynamic allocation of multi-factor portfolios. The trend represents a natural development of filling the gap between passive and active management. The paper addresses this direction by introducing the volatility-timed winners approach that applies past volatilities as a timing predictor to mitigate momentum factor underperformance for time intervals spanning the market downturn and post-crisis period. The proposed approach was confirmed with Spearman rank correlation and demonstrated in relation to different strategies including momentum volatility scaling, risk-based asset allocation, time series momentum and MSCI momentum indexes. The corresponding analysis generalized existing volatility scaling strategies and brought together the two branches of the smart-beta domain, factor investing and risk-based asset allocation.

Keywords: Factor timing, factor investing, risk-based asset allocation, momentum

JEL Classification: G11, C22, C41

Suggested Citation

Malitsky, Yulia, Momentum with Volatility Timing (July 9, 2019). Available at SSRN: https://ssrn.com/abstract=3417360 or http://dx.doi.org/10.2139/ssrn.3417360

Yulia Malitsky (Contact Author)

VKY Analytics, LLC ( email )

P.O. Box 1778
New York, NY 10185
United States

Université Toulouse I Capitole

2 Rue du Doyen-Gabriel-Marty
Toulouse, 31042
France

Toulouse Business School Research Centre

1 Place Alphonse Jourdain
Toulouse, 31000
France

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
2,922
Abstract Views
10,407
Rank
8,662
PlumX Metrics