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Coskewness and reversal of momentum returns: The US and international evidence
Dong, L.2; Dai, Y.3; Haque, T.4; Kot, H.W.1; Yamada, T.5
2022-10
Source PublicationJournal of Empirical Finance
ABS Journal Level3
ISSN0927-5398
Abstract

The winner-minus-loser (WML) momentum strategy carries an inherent downside as its returns have negative coskewness. We propose a coskewness-volatility-managed momentum strategy that reduces the reversal risk of the baseline WML strategy by 61% and that of the volatility-managed momentum strategy (Barosso and Santa-Clara, 2015) by 20% for US stocks. The returns of our strategy generate a slightly positive skewness in contrast with the negative skewness of the WML and volatility-managed strategies. Since the coskewness of momentum portfolio returns predict future returns for up to 12 months, our strategy is effective for momentum portfolios of holding periods longer than one month. Our strategy also mitigates momentum downside risks in major international stock markets such as the UK, Germany, and France.

KeywordReversal Risk Coskewness Momentum
DOIhttps://doi.org/10.1016/j.jempfin.2022.10.004
URLView the original
Indexed BySSCI
Language英語English
PublisherScienceDirect
Fulltext Access
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Document TypeJournal article
CollectionDEPARTMENT OF FINANCE AND BUSINESS ECONOMICS
Corresponding AuthorYamada, T.
Affiliation1.University of Macau
2.Hunan University of Technology and Business
3.Independent
4.University of Adelaide
5.Australian National University
Recommended Citation
GB/T 7714
Dong, L.,Dai, Y.,Haque, T.,et al. Coskewness and reversal of momentum returns: The US and international evidence[J]. Journal of Empirical Finance,2022.
APA Dong, L.,Dai, Y.,Haque, T.,Kot, H.W.,&Yamada, T..(2022).Coskewness and reversal of momentum returns: The US and international evidence.Journal of Empirical Finance.
MLA Dong, L.,et al."Coskewness and reversal of momentum returns: The US and international evidence".Journal of Empirical Finance (2022).
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