Enhanced Momentum Strategies

70 Pages Posted: 19 Aug 2019 Last revised: 19 Aug 2022

See all articles by Matthias X. Hanauer

Matthias X. Hanauer

Technische Universität München (TUM); Robeco Quantitative Investments

Steffen Windmüller

Technische Universität München (TUM) - School of Management

Date Written: August 17, 2022

Abstract

This paper compares the performance of three enhanced momentum strategies proposed in the literature: constant volatility-scaled momentum, constant semi-volatility-scaled momentum, and dynamic-scaled momentum. Using data for individual stocks from the U.S. and across 48 international countries, we find that all three approaches decrease momentum crashes and lead to higher risk-adjusted returns. However, in multiple factor comparison tests, no enhanced momentum strategy emerges as consistently superior. Finally, cross-country analyses relate momentum and the two constant volatility-scaled momentum returns to market dynamics, whereas dynamic-scaled momentum is significantly less affected, suggesting a reduced sensitivity to time-varying investor overconfidence.

Keywords: Anomalies, Asset pricing, Momentum, International stock markets

JEL Classification: G12, G14, G15

Suggested Citation

Hanauer, Matthias Xaver and Windmüller, Steffen, Enhanced Momentum Strategies (August 17, 2022). Available at SSRN: https://ssrn.com/abstract=3437919 or http://dx.doi.org/10.2139/ssrn.3437919

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 Quantitative Investments ( email )

Weena 850
Rotterdam, 3014 DA
Netherlands

HOME PAGE: http://www.robeco.com/en/insights/authors/matthias-hanauer.html

Steffen Windmüller (Contact Author)

Technische Universität München (TUM) - School of Management ( email )

Arcisstrasse 21
Munich, DE 80333
Germany

HOME PAGE: http://www.fm.wi.tum.de/index.php?id=188

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