#8 – FX Momentum
#14 – Momentum Effect in Stocks
#21 – Momentum Effect in Commodities
#118 – Time Series Momentum Effect

Authors: Goyal, Jagadeesh

Title: Cross-Sectional and Time-Series Tests of Return Predictability: What Is the Difference?

Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2610288

Abstract:

We analyze the differences between past-return based strategies that differ in conditioning on past returns in excess of zero (time-series strategy, TS) and past returns in excess of the cross-sectional average (cross-sectional strategy, CS). We find that the return difference between these two strategies is mainly due to time-varying long positions that the TS strategy takes in the aggregate market and, consequently, do not have any implications for the behavior of individual asset prices. However, TS and CS strategies based on financial ratios as predictors are sometimes different due to asset selection.

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#2 – Asset Class Momentum – Rotational System
#3 – Sector Momentum – Rotational System
#8 – FX Momentum
#14 – Momentum Effect in Stocks
#15 – Momentum Effect in Country Equity Indexes

Authors: Geczy, Samonov

Title: 215 Years of Global Multi-Asset Momentum: 1800-2014 (Equities, Sectors, Currencies, Bonds, Commodities and Stocks)

Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2607730

Abstract:

Extending price return momentum tests to the longest available histories of global financial asset returns, including country-specific sectors and stocks, fixed income, currencies, and commodities, as well as U.S. stocks, we create a 215-year history of multi-asset momentum, and we confirm the significance of the momentum premium inside and across asset classes. Consistent with stock-level results, we document a large variation of momentum portfolio betas, conditional on the direction and duration of the return of the asset class in which the momentum portfolio is built. A significant recent rise in pair-wise momentum portfolio correlations suggests features of the data important for empiricists, theoreticians and practitioners alike.

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#6 – Volatility Effect in Stocks – Long-Short Version
#7 – Volatility Effect in Stocks – Long-Only Version
#20 – Volatility Risk Premium Effect

Authors: Ilmanen

Title: Do Financial Markets Reward Buying or Selling Insurance and Lottery Tickets?

Link: https://www.aqr.com/~/media/files/papers/faj-do-financial-markets-reward-buying-or-selling-insurance-and-lottery-tickets.pdf

Abstract:

Selling financial investments with insurance or lottery characteristics should earn positive longrun premiums if investors like positive skewness enough to overpay for these characteristics. The empirical evidence is unambiguous: Selling insurance and selling lottery tickets have delivered positive long-run rewards in a wide range of investment contexts. Conversely, buying financial catastrophe insurance and holding speculative lottery-like investments have delivered poor longrun rewards. Thus, bearing small risks is often well rewarded, bearing large risks not.

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#237 – Dispersion Trading

Authors: Deng

Title: Volatility Dispersion Trading

Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1156620

Abstract:

This papers studies an options trading strategy known as dispersion strategy to investigate the apparent risk premium for bearing correlation risk in the options market. Previous studies have attributed the profits to dispersion trading to the correlation risk premium embedded in index options. The natural alternative hypothesis argues that the profitability results from option market inefficiency. Institutional changes in the options market in late 1999 and 2000 provide a natural experiment to distinguish between these hypotheses. This provides evidence supporting the market inefficiency hypothesis and against the risk-based hypothesis since a fundamental market risk premium should not change as the market structure changes.

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#5 – FX Carry Trade

Authors: Nunes, Piloiu

Title: Uncovered Interest Rate Parity: A Relation to Global Trade Risk

Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2595165

Abstract:

The paper gives evidence of a novel pricing factor for the cross-section of carry trade returns based on trade relations between countries. In particular, we apply network theory on countries' bilateral trade to construct a measure for countries' exposure to a global trade risk. A higher level of exposure implies that the economic activity in one country is highly dependent on the economic activity of its trade partners and on aggregate trade flow. We test the following hypothesis for carry trade strategies: high interest rate currencies are more exposed to global trade risk than low interest rates ones. We find empirically that low interest rate currencies are seen by investors as a hedge against global trade risk while high interest rate currencies deliver low returns when global trade risk is high, being negatively related to the global trade risk factor. These results provide evidence on the underlying macroeconomic sources of systematic risk in FX markets while accounting as well for other previously documented risk factors, such as the market factor and the volatility and liquidity risks.

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#3 – Sector Momentum – Rotational System

Authors: Du Plessis, Hallerbach

Title: Volatility Weighting Applied to Momentum Strategies

Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2599635

Abstract:

We consider two forms of volatility weighting (own volatility and underlying volatility) applied to cross-sectional and time-series momentum strategies. We present some simple theoretical results for the Sharpe ratios of weighted strategies and show empirical results for momentum strategies applied to US industry portfolios. We find that both the timing effect and the stabilizing effect of volatility weighting are relevant. We also introduce a dispersion weighting scheme which treats cross-sectional dispersion as (partially) forecastable volatility. Although dispersion weighting improves the Sharpe ratio, it seems to be less effective than volatility weighting.

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