Momentum Profits and Non-Normality Risks

The paper examines the role of non-normality risks in explaining the momentum puzzle of equity returns.

Author(s) :

Ana-Maria Fuertes

Associate Professor of Finance, Cass Business School, City University London

Joelle Miffre

Professor of Finance, EDHEC Business School

Wooi-Hou Tan

Director, Cyberring Ltd, London

Presentation :

It shows that momentum returns are not normally distributed. About 70 basis points of the annual momentum profits can be attributed to systematic skewness risk. This finding is pervasive across nine strategies and is reinforced when time dependencies in abnormal returns and risks are explicitly modeled. The analysis also reveals that the market and skewness risks of momentum portfolios evolve over the business cycle in a manner that is consistent with market timing and risk aversion. While the momentum puzzle still remains, these findings are in line with market efficiency.
Momentum Profits and Non-Normality Risks...
(1.33 MB)
Type : Working paper
Date : le 05/02/2007
Extra information : Pour plus d'informations, nous vous prions de vous adresser à Joanne Finlay, Direction de la recherche de l'EDHEC [] Les opinions exprimées sont celles de l'auteur et n'engagent pas la responsabilité de l'EDHEC.
Research Cluster : Finance

See Also

- 08-09-2017
Ranked 4th in France, EDHEC reinforces its position in the world’s Top 20 (16th place) in the 2017 Financial Times Master in Management Ranking, among prestigious international institutions...
- 30-08-2017
EDHEC welcomes students and participants who are back to school in the upcoming weeks. A positive and international atmosphere (more than 100 nationalities expected) shines through our...
Innovation with limited resources (Video)
- 18-08-2017
The article "Innovation with Limited Resources: Management Lessons from the German...
Station F successfully inaugurated in the presence of Emmanuel Macron and EDHEC
- 29-06-2017
EDHEC announced this May that it had joined Station F, the world’s biggest start-up...