Momentum and Crash Sensitivity

Stefan Ruenzi () and Florian Weigert ()

No 1801, Working Papers on Finance from University of St. Gallen, School of Finance

Abstract: This paper proposes a risk-based explanation of the momentum anomaly on equity markets. Regressing the momentum strategy return on the return of a self-financing portfolio going long (short) in stocks with high (low) crash sensitivity in the USA from 1963 to 2012 reduces the momentum effect from a highly statistically significant 11.94% to an insignificant 1.84%. We find additional supportive out-of sample evidence for our risk-based momentum explanation in a sample of 23 international equity markets.

Keywords: Asset pricing; asymmetric dependence; copulas; crash sensitivity; momentum; tail risk (search for similar items in EconPapers)
JEL-codes: C12 G01 G11 G12 G17 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2017-12
New Economics Papers: this item is included in nep-rmg
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http://ux-tauri.unisg.ch/RePEc/usg/sfwpfi/WPF-1801.pdf (application/pdf)

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Journal Article: Momentum and crash sensitivity (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:usg:sfwpfi:2018:01

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