Momentum-managed equity factors

Volker Flögel, Christian Schlag and Claudia Zunft

No 317, SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE

Abstract: Managed portfolios that exploit positive first-order autocorrelation in monthly excess returns of equity factor portfolios produce large alphas and gains in Sharpe ratios. We document this finding for factor portfolios formed on the broad market, size, value, momentum, investment, profitability, and volatility. The value-added induced by factor management via short-term momentum is a robust empirical phenomenon that survives transaction costs and carries over to multi-factor portfolios. The novel strategy established in this work compares favorably to well-known timing strategies that employ e.g. factor volatility or factor valuation. For the majority of factors, our strategies appear successful especially in recessions and times of crisis.

Keywords: factor timing; time series momentum; anomalies (search for similar items in EconPapers)
JEL-codes: G12 G17 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-cwa, nep-fmk, nep-isf and nep-ore
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:317

DOI: 10.2139/ssrn.3423287

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