Non-parametric momentum based on ranks and signs

Tsung-Yu Chen, Pin-Huang Chou, Kuan-Cheng Ko and S. Ghon Rhee

Journal of Empirical Finance, 2021, vol. 60, issue C, 94-109

Abstract: This study proposes alternative momentum strategies built on the rank and sign of daily returns. Rank and sign momentum strategies are robust to the presence of extreme price movements. They generate significant profits for short-term holding periods and exhibit no long-term return reversals. More importantly, they subsume traditional price momentum, but not vice versa. In addition, rank and sign momentum strategies experience much weaker momentum crashes. Further evidence indicates that rank and sign momentum profitability is less vulnerable to salient past returns while traditional price momentum winners (losers) tend to be overvalued (undervalued) when they face a higher degree of salience.

Keywords: Rank; Sign; Salience; Price momentum (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:60:y:2021:i:c:p:94-109

DOI: 10.1016/j.jempfin.2020.11.004

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