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Enhanced momentum strategies

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  • Hanauer, Matthias X.
  • Windmüller, Steffen

Abstract

This paper compares the performance of three enhanced momentum strategies proposed in the literature: constant volatility-scaled momentum, constant semi-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. However, in multiple factor comparison tests, no enhanced momentum strategy emerges as consistently superior. Finally, cross-country analyses relate momentum and the two constant volatility-scaled momentum returns to market dynamics, whereas dynamic-scaled momentum is significantly less affected, suggesting a reduced sensitivity to time-varying investor overconfidence.

Suggested Citation

  • Hanauer, Matthias X. & Windmüller, Steffen, 2023. "Enhanced momentum strategies," Journal of Banking & Finance, Elsevier, vol. 148(C).
    • Handle: RePEc:eee:jbfina:v:148:y:2023:i:c:s0378426622002928
    DOI: 10.1016/j.jbankfin.2022.106712
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    More about this item

    Keywords

    Anomalies; Asset pricing; Momentum; International stock markets;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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