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Risk-managed 52-week high industry momentum, momentum crashes and hedging macroeconomic risk

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  • Klaus Grobys

Abstract

This is the first study to investigate the profitability of Barroso and Santa-Clara’s [J. Financial Econ., 2015, 116, 111–120] risk-managing approach for George and Hwang’s [J. Finance, 2004, 59, 2145–2176] 52-week high momentum strategy in an industrial portfolio setting. The findings indicate that risk-managing adds value as the Sharpe ratio increases, and the downside risk decreases notably. Even after controlling for the spread of the traditional 52-week high industry momentum strategy in association with standard risk factors, the risk-managed version generates economically and statistically significant pay-offs. Notably, the risk-managed strategy is partially explained by changes in cross-sectional return dispersion, whereas the traditional strategy does not appear to be exposed to such economic risks.

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  • Klaus Grobys, 2018. "Risk-managed 52-week high industry momentum, momentum crashes and hedging macroeconomic risk," Quantitative Finance, Taylor & Francis Journals, vol. 18(7), pages 1233-1247, July.
    • Handle: RePEc:taf:quantf:v:18:y:2018:i:7:p:1233-1247
    DOI: 10.1080/14697688.2017.1414300
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    Cited by:

    1. Klaus Grobys & Topi Huhta-Halkola, 2019. "Combining value and momentum: evidence from the Nordic equity market," Applied Economics, Taylor & Francis Journals, vol. 51(26), pages 2872-2884, June.
    2. Simarjeet Singh & Nidhi Walia & Sivagandhi Saravanan & Preeti Jain & Avtar Singh & Jinesh jain, 2021. "Mapping the scientific research on alternative momentum investing: a bibliometric analysis," Journal of Economic and Administrative Sciences, Emerald Group Publishing Limited, vol. 38(4), pages 619-636, April.
    3. Pier Francesco Procacci & Tomaso Aste, 2018. "Forecasting market states," Papers 1807.05836, arXiv.org, revised May 2019.

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