Enhanced Momentum Strategies

73 Pages Posted: 19 Aug 2019 Last revised: 7 Aug 2020

See all articles by Matthias X. Hanauer

Matthias X. Hanauer

Technische Universität München (TUM); Robeco Quantitative Investments

Steffen Windmüller

Technical University of Munich - School of Management

Date Written: August 07, 2020

Abstract

This paper compares the performance of three enhanced momentum strategies proposed in the literature — idiosyncratic momentum, constant 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, while the alphas from scaled strategies are distinct from idiosyncratic momentum alphas. In multiple model comparison tests, we show that idiosyncratic momentum emerges as the best momentum strategy. Finally, cross-country analyses relate momentum and constant volatility-scaled momentum returns to proxies for time-varying overconfidence, whereas idiosyncratic momentum and dynamic-scaled momentum are significantly less affected.

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 07, 2020). 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)

Technical University of Munich - School of Management ( email )

Arcisstrasse 21
Munich, DE 80333
Germany

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

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
1,694
Abstract Views
5,521
rank
10,853
PlumX Metrics