Partial moment momentum

Yang Gao, Henry Leung and Stephen Satchell

Journal of Banking & Finance, 2022, vol. 135, issue C

Abstract: While momentum benefits from persistent trends of the market, such strategies are unable to distinguish between upside and downside risk and suffer consequently. We propose a Partial Moment Momentum (PMM) trading strategy that is sensitive to the sign of risk and show risk-adjusted outperformance compared to plain momentum and volatility-adjusted momentum strategies. The outperformance is robust across multiple time periods and in particular during market downturns. Further analysis based on conventional linear factor models shows negligible exposure to factor risk for our PMM portfolio. Finally, the performance of our proposed strategy appears to be enhanced when time series momentum is present and allows for improved risk management by distinguishing between upside and downside risks.

Keywords: Downside risk; Momentum; Partial moments; Portfolio performance (search for similar items in EconPapers)
JEL-codes: G11 G12 G17 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426621003125
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:135:y:2022:i:c:s0378426621003125

DOI: 10.1016/j.jbankfin.2021.106361

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().