We provide empirical evidence that the returns on US equity momentum exhibit a time-varying skewness which deepens during dramatic losses (crashes). As a result, the dynamics of the strategy expected returns reflects the time variation in both conditional volatility and skewness. This has first...

In this paper, we propose a stop-loss strategy to limit the downside risk of the well-known momentum strategy. At a stop-level of 10%, we find, with data from January 1926 to December 2013, that the maximum monthly losses of the equal- and value-weighted momentum strategies go down from -49.79%...

In this paper, we investigate volatility spillovers between oil prices and the stock prices of the companies listed in Borsa Istanbul. We employ the dynamic conditional correlation (DCC) and Baba, Engle, Kraft, and Kroner (BEKK) GARCH models using daily data for the period between June 22, 2015,...

We document that the variation in market liquidity is an important determinant of momentum crashes that is independent of other known explanations surfaced on this topic. This relationship is driven by the asymmetric large return sensitivity of short-leg of momentum portfolio to changes in...

Despite momentum's strong historical performance, its returns have large negative skewness and occasionally experiences persistent strings of sharp negative returns, referred as "momentum crashes" in the recent literature. I argue that momentum crashes are due to crowded trades which push prices...

Momentum is one of the largest and most pervasive market anomalies. However, despite a high mean and Sharpe ratio, momentum suffers from large negative skewness that comes from momentum crash periods. These crashes occur in times of both market stress and market rebound and thus variables that...

The disposition effect is an effect whereby investors tend to sell winning stocks and tend to hold losing stocks. This inclination is detrimental for investment results. Dacey and Zielonka (2008) showed the impact of the probability of further stock price rise under low stock price volatility on...

We construct a momentum factor that identifies cross-sectional winners and losers based on a weighting scheme that incorporates all the price data, over the entire lookback period, as opposed to only the first and last price points of the window. The weighting scheme is derived from the...

This paper studies the profitability of a selection of prominent momentum-based strategies in the European Monetary Union. In contrast to past examples documenting the lack of profitability of unconditional price momentum in the most recent decade, the current research finds that unconditional...