Since momentum arbitrage activity, buying winners and selling losers, effectively enlarges the return spread between these two groups, I find that the momentum spread (the difference of the formation-period recent 6-month returns between winners and losers) negatively predicts future momentum...

Based on intraday data for a large cross section of individual stocks, we find that the risk component of stock returns exhibits strong intraday momentum, and this pattern holds from previous market close to 10:00, and every half hour since then until market close at 16:00. Strikingly, the...

This paper develops a Monte-Carlo backtesting procedure for risk premia strategies and employs it to study Time-Series Momentum (TSM). Relying on time-series models, empirical residual distributions and copulas we overcome two key drawbacks of conventional backtesting procedures. We create...

Winner stocks have higher risk exposure to Fama and French's (1993) three factors (FF3F) than loser stocks during good economic times, and therefore should earn higher expected returns. Employing the conditional FF3F model to risk adjust returns on winner and loser stocks can reduce the average...

In this paper we address three main objections of behavioral finance to the theory of rational finance, considered as “anomalies” the theory of rational finance cannot explain: (i) Predictability of asset returns; (ii) The Equity Premium; (iii) The Volatility Puzzle. We offer resolutions of...

Many recent papers have investigated the role played by volatility in determining the cross-section of currency returns. This paper employs two time-varying factor models: a threshold model and a Markov-switching model to price the excess returns from the currency carry trade. We show that the...

We introduce a new class of momentum strategies, the risk-adjusted time series momentum (RAMOM) strategies, which are based on averages of past futures returns, normalized by their volatility. We test these strategies on a universe of 64 liquid futures contracts and show that RAMOM strategies...

Cross-sectional asset pricing tests with GMM can generate spuriouslyhigh explanatory power for factor models when the moment conditions are specifiedsuch that they allow the estimated factor means to substantially deviate from theobserved sample averages. In fact, by shifting the weights on the...