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Publication date: 17 January 2023

Victoria Dobrynskaya and Mikhail Dubrovskiy

The authors consider a variety of cryptocurrency and equity risk factors as potential forces that drive cryptocurrency returns and carry risk premiums. In a cross-section of 2,000…

Abstract

The authors consider a variety of cryptocurrency and equity risk factors as potential forces that drive cryptocurrency returns and carry risk premiums. In a cross-section of 2,000 biggest cryptocurrencies during 2014–2020, only downside market risk, cryptocurrency size and cryptocurrency policy uncertainty factors are systematically priced with significant premiums. Cryptocurrencies, which have greater exposures to these factors, yield higher returns subsequently. Equity market risk, particularly equity downside market risk, appears to be more important than cryptocurrency market risk, suggesting greater linkages between cryptocurrency and equity markets than we used to think. Global and the US equity factors are more relevant for the cryptocurrency market than local factors from other markets. However, there is no evidence that exposure to momentum, volatility and Fama–French factors is compensated by higher returns.

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Fintech, Pandemic, and the Financial System: Challenges and Opportunities
Type: Book
ISBN: 978-1-80262-947-7

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Article
Publication date: 22 October 2019

Lars Kaiser and Jan Welters

Existing empirical evidence on the impact of environmental, social and governance (ESG) integration on momentum portfolios is limited. The combination of the two is relevant given…

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Abstract

Purpose

Existing empirical evidence on the impact of environmental, social and governance (ESG) integration on momentum portfolios is limited. The combination of the two is relevant given the risk-mitigating effect of ESG criteria, as well as the existence of momentum crashes. As such, ESG might lend itself to reduce crash risk for momentum investors.

Design/methodology/approach

In this paper, the authors provide insight into the impact of an ESG-constrained investment universe on momentum returns. The overall investment universe is split into high and low ESG-rated segments to anylse the characteristics of momentum portfolios conditional on the ESG rating.

Findings

The authors document the existence of a momentum premium across European stocks and for a subset of high and lows ESG-rated stocks. However, absolute returns of momentum strategies are significantly lower if momentum strategies are pursued on a subset of high ESG stocks. Additionally, findings document a risk-mitigation effect of ESG for momentum portfolios with significantly lower returns for momentum portfolios based on low ESG stocks during periods of momentum crashes.

Originality/value

Research on momentum investing and the momentum premium is large and well established, yet many questions remain. A recent study by Daniel and Moskowitz (2016) has analyzed crash risk for momentum investors and identified periods of strong momentum crashes. On the other hand, the literature on ESG integration in standing investment approaches is still limited, but as demand for sustainable products is increasing, so is the demand for a better understanding of the impact of ESG integration. Consequently, the authors provide evidence on the benefits of ESG integration for momentum investors to reduce their exposure to momentum crash risk.

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The Journal of Risk Finance, vol. 20 no. 5
Type: Research Article
ISSN: 1526-5943

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Article
Publication date: 27 November 2007

Howard Moskowitz, Samuel Rabino, Alex Gofman and Daniel Moskowitz

The purpose of this study is to use an approach that helps the pharma industry develop and structure communications that provide buyers and sellers with a better procedure to…

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Abstract

Purpose

The purpose of this study is to use an approach that helps the pharma industry develop and structure communications that provide buyers and sellers with a better procedure to drive decisions to buy/sell stocks. Messages related to pharmaceutical companies and their products were collected from many sources.

Design/methodology/approach

An experimental design was employed to evaluate communication concepts in a systematic way.

Findings

The most important finding was that the proclivity to buy/sell individual pharmaceutical stocks responds to varying sets of messages.

Research limitations/implications

The study only covers the pharmaceutical industry.

Practical implications

From a practical stand‐point, the methodology facilitates the design of informative messages for consumers and shareholders within the pharma industry.

Originality/value

The study is unique in that it presents a statistically grounded experimental design evaluating communications messages and personal values that are important for individuals who routinely sell or purchase stocks.

Details

International Journal of Pharmaceutical and Healthcare Marketing, vol. 1 no. 4
Type: Research Article
ISSN: 1750-6123

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Article
Publication date: 19 January 2022

Hilal Anwar Butt, Mohsin Sadaqat and Muhammad Tahir

The main purpose of this study is to enunciate the underlying factors that enhance the performance of scaled momentum strategies.

217

Abstract

Purpose

The main purpose of this study is to enunciate the underlying factors that enhance the performance of scaled momentum strategies.

Design/methodology/approach

In previous studies, the negative relationship between the lagged volatility and future return of momentum strategy is exploited to manage the risk. But this negative relationship only holds when volatility is higher, further the volatility is shown to be persistent. The implication of these two characteristics is important and this paper highlights that.

Findings

The higher performance of the scaled momentum strategies for the US market is linked with the length of the investment horizon. The traditional asset pricing models fail to explain this relationship. However, the authors find that the excess variance loaded on the long side of these strategies is one important explanation of this horizon bound performance of these strategies.

Practical implications

This study highlights that the volatility scaled momentum strategy has higher gains as the investment horizon increases. Therefore, it is an advisable investment strategy for the pension fund industry.

Originality/value

Momentum strategy is unique as it fulfils two criteria of performance enhancement through volatility scaling, such as, the persistent in volatility and its negative relationship with the returns. However, the impact on the performance of the negative relationship between volatility and return that only exist in highest volatility related states is not discussed. The authors have shown that this aspect of volatility and return relationship of the momentum strategy has an important bearing on the performance of the volatility scaled momentum strategies.

Highlights of the Paper

  1. This study finds that the Sharpe ratios and the alphas of the volatility scaled strategies increase as the investment horizon increases.

  2. This is because the volatility series are highly persistent and the negative predictive relationship between the volatility and future momentum returns only exist when the volatility is higher. The impact of these two characteristics of the volatility series on the performance of the scaled momentum strategies is not discussed in the literature.

  3. We find that the scaled strategies invest more/less when the volatility of the momentum strategy is lower/higher. By investing less when volatility is higher, the scaled strategies avoid momentum crashes and lessens the contribution of the variance from the short side in the overall variance of these strategies.

  4. It is further shown that the higher performance of the volatility scaled strategies, at each investment related horizon can be explained by the higher variance loaded on the long side of such strategies in comparison to the traditional momentum strategy.

This study finds that the Sharpe ratios and the alphas of the volatility scaled strategies increase as the investment horizon increases.

This is because the volatility series are highly persistent and the negative predictive relationship between the volatility and future momentum returns only exist when the volatility is higher. The impact of these two characteristics of the volatility series on the performance of the scaled momentum strategies is not discussed in the literature.

We find that the scaled strategies invest more/less when the volatility of the momentum strategy is lower/higher. By investing less when volatility is higher, the scaled strategies avoid momentum crashes and lessens the contribution of the variance from the short side in the overall variance of these strategies.

It is further shown that the higher performance of the volatility scaled strategies, at each investment related horizon can be explained by the higher variance loaded on the long side of such strategies in comparison to the traditional momentum strategy.

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China Finance Review International, vol. 12 no. 3
Type: Research Article
ISSN: 2044-1398

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Article
Publication date: 5 August 2024

Sanjay Sehgal, Asheesh Pandey and Swapna Sen

In the present study, we investigate whether enhanced momentum strategies outperform price momentum strategies and if they show greater resilience and stability under adverse…

61

Abstract

Purpose

In the present study, we investigate whether enhanced momentum strategies outperform price momentum strategies and if they show greater resilience and stability under adverse market conditions. We also examine if such strategies are explained by prominent asset pricing models or are a result of behavioral mispricing.

Design/methodology/approach

Data consist of the equity shares of all companies listed on National Stock Exchange over the study period. To check the efficacy of enhanced momentum over price momentum, six momentum strategies have been designed and their raw as well as risk-adjusted returns using multi-factor models have been observed. Behavioral mispricing has been examined by constructing an investor attention index. Finally, few robustness tests have been performed to confirm the results.

Findings

We find that an enhanced momentum strategy which combines relative and absolute strength momentum outperforms conventional price momentum strategy in India. We also demonstrate that rational pricing models are not able to explain momentum profits for any of the strategies. Finally, we observe that investor overreaction is the possible explanation of momentum profits in India. Thus, our results confirm the role of behavioral mispricing in explaining momentum returns.

Originality/value

Our research is the first major attempt to study enhanced momentum strategies in the Indian context. We experiment with several new enhanced momentum strategies which have not been explored in prior literature. The findings have strong implications for global portfolio managers who wish to design profitable trading strategies.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

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Article
Publication date: 29 April 2021

Simarjeet Singh, Nidhi Walia, Sivagandhi Saravanan, Preeti Jain, Avtar Singh and Jinesh jain

This study aims to recognize the current dynamics, prolific contributors and salient trends and propose future research directions in the area of alternative momentum investing.

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Abstract

Purpose

This study aims to recognize the current dynamics, prolific contributors and salient trends and propose future research directions in the area of alternative momentum investing.

Design/methodology/approach

The study uses a blend of electronic database and forward reference searching to ensure the incorporation of all the significant studies. With the help of the Scopus database, the present study retrieves 122 research papers published from 1999 to 2020.

Findings

The results reveal that alternative momentum investing is an emerging area in the field of momentum investing. However, this area has witnessed an exponential growth in last ten years. The study also finds that North American, West European and East Asian countries dominate in total research publications. Through network citation analysis, the study identifies five major clusters: industrial momentum, earnings momentum, 52-week high momentum, time-series momentum and risk-managed momentum.

Research limitations/implications

The present review will serve as a guide for financial researchers who intend to work on alternative momentum approaches. The study proposes several unexplored research themes in alternative momentum investing on which future studies can focus.

Originality/value

The study embellishes the existing literature on momentum investing by contributing the first bibliometric review on alternative momentum approaches.

Details

Journal of Economic and Administrative Sciences, vol. 38 no. 4
Type: Research Article
ISSN: 2054-6238

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Article
Publication date: 10 March 2020

Gagari Chakrabarti and Chitrakalpa Sen

The purpose of this study is to explore the inherent instability, if any, in the context of investment in stocks of environment friendly companies (or the “green” stocks) across…

991

Abstract

Purpose

The purpose of this study is to explore the inherent instability, if any, in the context of investment in stocks of environment friendly companies (or the “green” stocks) across the globe using the time series momentum (TSM) trading strategies.

Design/methodology/approach

Using the monthly data for the Green Indexes from the USA, the Europe and the Asia-Pacific region over 2003-2019, the authors construct TSM trading strategies to examine the efficacy of regional Green Indexes as well as two diversified global green portfolios to offer abnormal return to attract investors, particularly speculators. The authors’ explore further whether such strategies could operate as hedging instrument. A comparison of results across different regions helps the authors establish a universal nature, if any, of investment in green stocks.

Findings

The study finds that regional Green Indexes are unable to outperform the market. The global green portfolios perform significantly better. The inefficacy of the relevant time series momentum trading strategies rules out the possibility of speculations. However, the number of profitable momentum strategies is significantly higher for the diversified portfolios in longer run. The portfolios perform significantly better in outperforming the buy-only strategies as well. The stable market, escalated demand and the resulting increment in valuation of green stocks make adoption of greener technologies a choice rather than a forced obligation. This offers a solution to the problem of Tragedy of Common.

Originality/value

Sustained increase in investment in green stocks is crucial from an environment perspective, as better valuation of their stocks would indubitably convince firms to reduce their carbon footprints. A continued enthusiasm however would require investors’ faith in it. Presence of momentum profit would invite speculators leading to irrational exuberance, dwindling confidence and consequent fragility. Literature on green investment is relatively sparse with the threat of its vulnerability issues left largely unnoticed. The authors’ study fills these gaps.

Details

Studies in Economics and Finance, vol. 37 no. 2
Type: Research Article
ISSN: 1086-7376

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Article
Publication date: 13 September 2022

Mayank Joshipura and Sangeeta Wats

Over the past three decades, numerous conceptual and empirical studies have discussed momentum investment strategies’ presence, pervasiveness and persistence. However, science…

340

Abstract

Purpose

Over the past three decades, numerous conceptual and empirical studies have discussed momentum investment strategies’ presence, pervasiveness and persistence. However, science mapping in the field is inadequate. Hence, this study aims to comprehend and explore current dynamics, understand knowledge progression, elicit trends through thematic map analysis, synthesize knowledge structures and provide future research directions in this domain.

Design/methodology/approach

The study applies bibliometric analysis on 562 Scopus indexed articles from 1986 to 2021. Biblioshiny version 3.1.4, a Web-based application included in Bibiliometrix package developed in R-language (Aria and Cuccurullo, 2017), was used to examine: the most prominent articles, journals, authors, institutions and countries and to understand the thematic evolution and to elicit trends through the synthesis of knowledge structures including conceptual, intellectual and social structures of the field.

Findings

Motor themes, basic transverse, niche and emerging and declining themes were identified using (Callon, 1991) strategic thematic map. Besides, four major clusters based on a cocitation network of documents were identified: empirical evidence and drivers of momentum returns, theories explaining momentum returns and implications for asset pricing and market efficiency, avoiding momentum crashes and momentum in alternative asset classes, alternative explanations for momentum returns. The study infers that momentum research is becoming multidisciplinary given the dominance of behavioral theories and economic aspects in explaining the persistence of momentum profits and offers future research directions.

Research limitations/implications

The study deploys bibliometric analysis, appropriate for deriving insights from the vast extant literature. However, a meta-analysis might offer deeper insights into specific dimensions of the research topic. Besides, the study’s findings are based on Scopus indexed articles analyzed using bibilioshiny; the database and software limitations might have affected the findings.

Practical implications

The study is a ready reckoner for scholars who intend to recognize the evolution of momentum investment strategies, current dynamics and future research direction. The study offers practitioners insights into efficiently designing and deploying momentum investment strategies and ways to avoid momentum crashes.

Social implications

The study offers insights into the irrational behavior and systematic errors committed by market participants that helps regulators and policymakers to direct investors’ educational efforts to minimize systematic behavioral errors and related adverse financial consequences.

Originality/value

This comprehensive study on momentum investment strategies evaluates research trends and current dynamics draws a thematic map, knowledge progression in the field and offers future research directions.

Details

Qualitative Research in Financial Markets, vol. 15 no. 2
Type: Research Article
ISSN: 1755-4179

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Available. Open Access. Open Access
Article
Publication date: 14 November 2022

Simarjeet Singh, Nidhi Walia, Stelios Bekiros, Arushi Gupta, Jigyasu Kumar and Amar Kumar Mishra

This research study aims to design a novel risk-managed time-series momentum approach. The present study also examines the time-series momentum effect in the Indian equity market…

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Abstract

Purpose

This research study aims to design a novel risk-managed time-series momentum approach. The present study also examines the time-series momentum effect in the Indian equity market. Apart from this, the study also proposes a novel risk-managed time-series momentum approach.

Design/methodology/approach

The study considers the adjusted monthly closing prices of the stocks listed on the Bombay Stock Exchange from January 1996 to December 2020 to formulate long-short portfolios. Newey–West t statistics were used to test the significance of momentum returns. The present research has considered standard risk factors, i.e. market, size and value, to evaluate the risk-adjusted performance of time-series momentum portfolios.

Findings

The present research reports a substantial absolute momentum effect in the Indian equity market. However, absolute momentum strategies are exposed to occasional severe losses. The proposed time-series momentum approach not only yields 2.5 times higher return than the standard time-series momentum approach but also causes substantial enhancement in downside risks and higher-order moments.

Practical implications

The study's outcomes offer valuable insights for professional investors, capital market regulators and asset management companies.

Originality/value

This study is one of the pioneers attempting to test the time-series momentum effect in emerging economies. Besides, current research contributes to the escalating literature on risk-managed momentum by suggesting a novel revised time-series momentum approach.

Details

Journal of Economics, Finance and Administrative Science, vol. 27 no. 54
Type: Research Article
ISSN: 2218-0648

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Article
Publication date: 14 September 2021

Daniel Folkinshteyn and Jordan Moore

Momentum strategies exhibit quarterly seasonality, earning significantly higher average strategy returns in the third month of the quarter than the first month. The authors…

180

Abstract

Purpose

Momentum strategies exhibit quarterly seasonality, earning significantly higher average strategy returns in the third month of the quarter than the first month. The authors evaluate the magnitude of quarterly seasonality in various momentum strategies to examine the relation between quarterly seasonality and risk-adjusted monthly returns.

Design/methodology/approach

The authors construct long-short portfolios for various types of momentum strategies and calculate the average returns of these portfolios in the three months of the quarter. They also calculate the average changes in institutional ownership across the different portfolios.

Findings

The authors demonstrate that quarterly seasonality is directly associated with quarterly changes in net purchases by institutional investors. Additionally, they show that near-term price momentum exhibits more seasonality than other momentum strategies, consistent with institutional investor incentives.

Research limitations/implications

Researchers studying momentum should understand that quarterly seasonality increases the standard deviation of monthly returns for different types of momentum strategies.

Practical implications

Individual investors and investment managers should consider whether it is early or late in the calendar quarter when implementing momentum strategies.

Originality/value

Quarterly seasonality explains several seemingly independent findings in the momentum literature. In cases where researchers show one momentum strategy outperforms another on a risk-adjusted basis, the authors find that the superior strategy exhibits less quarterly seasonality. This pattern holds across types of momentum strategies, strategy formation periods and asset classes.

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