Momentum crash, credit risk and optionality effects in bear markets and crisis periods: evidence from the US stock market

Klaus Grobys

Applied Economics Letters, 2017, vol. 24, issue 6, 387-391

Abstract: This study explores whether the credit risk anomaly exhibits option-like behaviour similar to the momentum anomaly. It finds that the inverted credit risk spread indeed displays option-like behaviour in bear market states. Unlike a momentum portfolio, which is effectively a short call option on the market, an inverted credit risk portfolio appears to be a long call option on the market.

Date: 2017
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DOI: 10.1080/13504851.2016.1194961

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