Three New Insights from Academic Research Related to Equity Momentum Strategy
1 min readAug 5, 2019
- the momentum spread (the difference of the formation-period recent 6-month returns between winners and losers) negatively predicts future momentum profit in the long-term (but not in the following month), the negative predictability is mainly driven by the old momentum spread (old momentum stocks are based on whether a stock has been identified as a momentum stock for more than three months)
— the momentum profits based on total stock returns can be decomposed into three components: a long-term average alpha component that reverses, a stock beta component that accounts for the dynamic market exposure (and momentum crash risk), and a residual return component that drives the momentum effect (and subsumes total-return momentum)
— the profitability and the optimal combination of ranking and holding periods of momentum strategies for a sample of Core and Peripheral European equity markets the profitability vary across markets - See more: https://quantpedia.com/Blog/Details/three-new-insights-from-academic-research-related-to-equity-momentum-strategy
