IDEAS home Printed from https://ideas.repec.org/p/chf/rpseri/rp1530.html
   My bibliography  Save this paper

The Acceleration Effect and Gamma Factor in Asset Pricing

Author

Listed:
  • Diego ARDILA-ALVAREZ

    (ETH Zurich)

  • Zalàn FORRÒ

    (ETH Zurich)

  • Didier SORNETTE

    (ETH Zurich and Swiss Finance Institute)

Abstract

We report strong evidence that changes of momentum, i.e. ``acceleration'', defined as the first difference of successive returns, provide better performance and higher explanatory power than momentum. The corresponding $\Gamma$-factor explains the momentum-sorted portfolios entirely but not the reverse. Thus, momentum can be considered an imperfect proxy for acceleration, and its success can be attributed to its correlation to the predominant $\Gamma$-factor. $\Gamma$-strategies based on the ``acceleration'' effect are on average profitable and beat momentum-based strategies in two out of three cases, for a large panel of parameterizations. The ``acceleration'' effect and the $\Gamma$-factor profit from transient non-sustainable accelerating (upward or downward) log-prices associated with positive feedback mechanisms.

Suggested Citation

  • Diego ARDILA-ALVAREZ & Zalàn FORRÒ & Didier SORNETTE, 2015. "The Acceleration Effect and Gamma Factor in Asset Pricing," Swiss Finance Institute Research Paper Series 15-30, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp1530
    as

    Download full text from publisher

    File URL: http://ssrn.com/abstract=2645882
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Asset pricing; momentum; positive feedbacks; acceleration; investment strategies;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:chf:rpseri:rp1530. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ridima Mittal (email available below). General contact details of provider: https://edirc.repec.org/data/fameech.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.