The idiosyncratic momentum anomaly

Blitz, David; Hanauer, Matthias X.; Vidojevic, Milan

doi:10.1016/j.iref.2020.05.008

Cited by 52 publications

(37 citation statements)

References 44 publications

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“…Using the model selection criterion suggested by Akaike, the AIC which can be seen in detail in Gujarati and Porter (2011) or Wooldridge (2012), the market model to estimate the idiosyncratic risk was selected. With the alpha and betas parameters greater than zero, the volatility models estimated in this work assume their general form performed by the expressions described below: the ARCH (q) model represented by the expression (4); the GARCH (p, q) model represented by expression (5); the IGARCH (p, q) model represented by expression (6); the EGARCH (p, q, r) model represented by the expression (7); and TGARCH (p, q, r) model represented by the expression (8).…”

Section: Methodological Approachmentioning

confidence: 99%

“…In general, market volatility increases in the periods leading up to these crises and during crisis periods, as observed by Kalra (2008) in the recent period of the world economy with the subprime crisis. Among the most recent studies that attempt to estimate idiosyncratic risk, it can be mention Blitz et al (2020) which deals with this risk as an anomaly can be mentioned, Chang et al (2018) with data from the Japanese economy, and Shi and Zhou (2019) that verify the idiosyncratic risk of the Chinese stock market. This work aims to estimate the idiosyncratic risk or unique risk of the Latin American economies and the emerging economies using heteroscedastic conditional models of the ARCH family models to verify the impact of the Covid-19 pandemic on the risk associated with productive projects developed in the Latin American countries, namely, Argentine, Brazil, Chile, Colombia, Mexico and Peru, and the other emerging countries as well as on the risk associated with investments and financing.…”

Section: Introductionmentioning

confidence: 99%

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COVID-19 Pandemic Initial Effects on the Idiosyncratic Risk in Latin America

Salles

2021

REMEF

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This work aims to estimate the idiosyncratic risk of Latin American economies and emerging economies using heteroscedastic conditional models to verify the impact of the Covid-19 pandemic on the risk associated with productive projects. The methodology used is based on the portfolio theory to estimate the idiosyncratic risk. The results highlight that Latin American economies are more susceptible to sanitary crises, such as the current pandemic, than emerging economies. The inability of emerging countries to generate the necessary savings to provide for their development imposes the need to attract resources for project financing and investment. Thus, determining the specific risk of Latin American countries is fundamental for international investors giving them another parameter when deciding on investment or financing on the continent. Originally, this work demonstrates how the sanitary crisis deriving from the Covid-19 pandemic affected the idiosyncratic or specific risk of Latin American economies using their capital market indicators. This study contributes to the assessment of Latin American economies specific risk or country risk at the beginning of the pandemic.

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Section: Methodological Approachmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

COVID-19 Pandemic Initial Effects on the Idiosyncratic Risk in Latin America

Salles

2021

REMEF

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“…Zaremba (2018) studies the momentum effect in 40 cross sectional anomalies for 78 countries and finds momentum effect to be present in more than half of such anomalies. Blitz et al (2018) document the existence of the idiosyncratic momentum effect in non-U.S. countries. Similarly, Linnainmaa and Roberts (2018) support that profitability anomaly subsumes most of the earnings-related anomalies.…”

Section: Literature Reviewmentioning

confidence: 97%

Equity market anomalies in major European economies

Pandey¹,

Sehgal

Mohapatra³

et al. 2021

Investment Management and Financial Innovations

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This paper investigates five leading equity market anomalies – size, value, momentum, profitability, and asset growth, for four Western European markets, namely, Germany, France, Italy and Spain, from January 2002 to March 2018. The study tests whether these anomalies reverse under different macro-economic uncertainty conditions, and evaluates if strategies based on time diversification can be formed using these equity market anomalies. Market anomalies were tested using four major asset pricing models – the Capital Asset Pricing Model, the Fama-French three-factor model, the Carhart model, and the Fama-French five-factor model. Macro-economic uncertainty was tested using two proxies, namely VIX and default premiums. Time diversified strategies were examined by estimating Sharpe ratios of combined portfolios formed by combining winner univariate portfolios. Value effect in Germany, Size effect in France and Profitability effect in Italy and Spain provide the highest unadjusted returns on long side strategies. No significant reversal of these anomalies was found under different macroeconomic uncertainties. Asset pricing tests show that CAPM works well for Spain and Italy, while Carhart’s model explains returns in Germany. The Fama-French five factor model does not seem to be a good descriptor of asset pricing for data. No suitable model for explaining asset returns is identified for France. Finally, it is observed that some of the equity market anomalies seem to be countercyclical and therefore provide time diversification opportunities. The study has implications for academicians, investors, and policy makers by providing insights for developing profitable investment strategies and highlighting the efficacy of alternative models as performance benchmarks.

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“…Over time, different strategies based on momentum effect have been suggested by researchers (Alhenawi, 2015; Barroso & Santa-Clara, 2015; Blitz et al, 2018; Chang et al, 2018; Conrad & Yavuz, 2017; Daniel & Moskowitz, 2016; Moskowitz et al, 2012; Novy-Marx, 2012; Novy-Marx & Velikov, 2015; Pukthuanthong et al, 2019; Vu, 2012). Zaremba (2018) examines momentum effect among different anomalies in 78 countries and observes that half of the anomalies among sample countries have momentum effect.…”

Section: Literature Reviewmentioning

confidence: 99%

Equity Market Anomalies, VIX and Asset Pricing: Trading Strategies for India

Pandey

2019

The Indian Economic Journal

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In this article we examine five prominent equity anomalies, viz., size, value, profitability, investment and momentum for Indian capital market using data from July 2001 to June 2019. We test the sample anomalies through four prominent factor models and find that all the factor anomalies remain significant for India, however, size and value anomaly provide substantial risk adjusted returns to be exploited by portfolio managers. We further evaluate if the anomalies tend to reverse under different macro-economic uncertainty, which is proxied by VIX. We find barring Size effect none of the anomaly reverses under different macro-economic conditions. We further observe that Fama French three factor model subsumes the majority of the alpha effect, however, none of the factor models fully explain the alphas of sample anomalies. Finally, we find that few of the sample anomalies are countercyclical in nature and thus, provide time diversification opportunity. Profitability-size anomaly provides risk adjusted time diversification opportunity. Our results have significant implications for portfolio managers, policy makers and academia.

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The idiosyncratic momentum anomaly

Cited by 52 publications

References 44 publications

COVID-19 Pandemic Initial Effects on the Idiosyncratic Risk in Latin America

COVID-19 Pandemic Initial Effects on the Idiosyncratic Risk in Latin America

Equity market anomalies in major European economies

Equity Market Anomalies, VIX and Asset Pricing: Trading Strategies for India

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