Enhanced Momentum Strategies

66 Pages Posted: 19 Aug 2019 Last revised: 30 Sep 2019

See all articles by Matthias X. Hanauer

Matthias X. Hanauer

Robeco Asset Management - Quantitative Strategies; Technische Universität München (TUM)

Steffen Windmueller

Technische Universität München (TUM)

Date Written: August 15, 2019

Abstract

This paper compares the performance of three momentum risk management techniques proposed in the literature — idiosyncratic momentum, constant volatility-scaling and dynamic scaling. Using data for individual stocks from the U.S. and across 48 international countries, we find that all three approaches decrease momentum crashes, lead to higher risk-adjusted returns and raise break even transaction costs. In a multiple model comparison test that also controls for other factors, idiosyncratic momentum emerges as the best momentum strategy. Finally, we find that the alpha stemming from volatility-scaling is distinctive from the idiosyncratic momentum alpha.

Keywords: Momentum, Momentum Scaling, Idiosyncratic Momentum, Risk Management

JEL Classification: G12, G14, G15

Suggested Citation

Hanauer, Matthias Xaver and Windmueller, Steffen, Enhanced Momentum Strategies (August 15, 2019). Available at SSRN: https://ssrn.com/abstract=3437919 or http://dx.doi.org/10.2139/ssrn.3437919

Matthias Xaver Hanauer

Robeco Asset Management - Quantitative Strategies ( email )

Weena 850
Rotterdam, 3014 DA
Netherlands

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

Technische Universität München (TUM) ( email )

Arcisstr. 21
Munich, D-80290
Germany

HOME PAGE: http://www.fm.wi.tum.de/?id=31

Steffen Windmueller (Contact Author)

Technische Universität München (TUM) ( email )

Arcisstrasse 21
Munich, 80333
Germany

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

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