Risk adjusted momentum strategies: A comparison between constant and dynamic volatility scaling approaches

Minyou Fan, Youwei Li and Jiadong Liu

Research in International Business and Finance, 2018, vol. 46, issue C, 131-140

Abstract: We compare the performance of two volatility scaling methods in momentum strategies: (i) the constant volatility scaling approach of Barroso and Santa-Clara (2015), and (ii) the dynamic volatility scaling method of Daniel and Moskowitz (2016). We perform momentum strategies based on these two approaches in a diversified portfolio consisting of 55 global liquid futures contracts, and further compare these results to the time series momentum and buy-and-hold strategies. We find that the momentum strategy based on the constant volatility scaling method is the most efficient approach with an annual return of 15.3%.

Keywords: Cross-sectional momentum; Time series momentum; Momentum crashes; Volatility scaling (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (8)

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Working Paper: Risk adjusted momentum strategies: a comparison between constant and dynamic volatility scaling approaches (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:46:y:2018:i:c:p:131-140

DOI: 10.1016/j.ribaf.2017.12.004

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