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Return Volatility, Skewness, and Momentum Effects

In: Handbook of Investment Analysis, Portfolio Management, and Financial Derivatives In 4 Volumes

Author

Listed:
  • Alex YiHou Huang
  • Ming-Che Hu

Abstract

This study identifies nonlinear patterns of momentum profits across stocks with different levels of return volatility and skewness. It finds that momentum profits are the largest from mildly volatile and skewed stocks; this phenomenon is consistently observed for different formation/holding periods, types of examined returns, and momentum grouping. Based on the patterns, this chapter proposes a sample filtering criterion for momentum investment; the profits accrued through the sample filtering are economically enlarged. Such an enhancement of momentum profits by the filtering process is documented in various strategies, including the conventional, 52-week high, and risk-managed momentum strategies.

Suggested Citation

  • Alex YiHou Huang & Ming-Che Hu, 2024. "Return Volatility, Skewness, and Momentum Effects," World Scientific Book Chapters, in: Cheng Few Lee & Alice C Lee & John C Lee (ed.), Handbook of Investment Analysis, Portfolio Management, and Financial Derivatives In 4 Volumes, chapter 67, pages 2121-2150, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789811269943_0067
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    Keywords

    Financial Accounting; Financial Auditing; Mutual Funds; Hedge Funds; Asset Pricing; Options; Portfolio Analysis; Risk Management; Investment Analysis; Momentum Analysis; Behavior Analysis; Futures; Index Futures; CDCs; Financial Econometrics; Statistics; Financial Derivatives; Financial Accounting;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G1 - Financial Economics - - General Financial Markets
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing
    • G3 - Financial Economics - - Corporate Finance and Governance

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