Risk-managed 52-week high industry momentum, momentum crashes and hedging macroeconomic risk

Klaus Grobys

Quantitative Finance, 2018, vol. 18, issue 7, 1233-1247

Abstract: This is the first study to investigate the profitability of Barroso and Santa-Clara’s [J. Financial Econ., 2015, 116, 111–120] risk-managing approach for George and Hwang’s [J. Finance, 2004, 59, 2145–2176] 52-week high momentum strategy in an industrial portfolio setting. The findings indicate that risk-managing adds value as the Sharpe ratio increases, and the downside risk decreases notably. Even after controlling for the spread of the traditional 52-week high industry momentum strategy in association with standard risk factors, the risk-managed version generates economically and statistically significant pay-offs. Notably, the risk-managed strategy is partially explained by changes in cross-sectional return dispersion, whereas the traditional strategy does not appear to be exposed to such economic risks.

Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:taf:quantf:v:18:y:2018:i:7:p:1233-1247

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DOI: 10.1080/14697688.2017.1414300

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