#118 – Time Series Momentum Effect

Authors: Georgopoulou, Wang

Title: The Trend is Your Friend: Time-Series Momentum Strategies Across Equity and Commodity Markets

Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2618243

Abstract:
Using a dataset of 67 equity and commodity indices from 1969 to 2013, this study documents a significant time-series momentum effect across international equity and commodity markets. This paper further documents that international mutual funds have a tendency to buy instruments that have been performing well in recent months, but they do not systematically sell those that have been performing poorly in the same periods. We also find that a diversified long-short momentum portfolio realizes its largest profits in extreme market conditions, but the market interventions by central banks in recent years seem to challenge the performance of such portfolios.

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#8 – FX Momentum

Authors: Grobis, Heinonen

Title: Is Momentum in Currency Markets Driven by Global Economic Risk?

Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2619146

Abstract:

This article documents a robust link between the returns of the momentum anomaly implemented in currency markets and global economic risk, measured by the currency return dispersion (RD). We find the spread of the zero-cost momentum strategy to be significantly larger in high RD states compared to low RD states. The relation between momentum payoffs and global economic risk appears to increase linearly in risk. Notably, the results provide strong evidence that the same global economic risk component is present in equity markets.

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#20 – Volatility Risk Premium Effect

Authors: Donninger

Title: Hedging Adaptive Put Writing with VIX Futures : The Affenpinscher Strategy

Link: http://www.godotfinance.com/pdf/AffenPinscherStrategy_Rev1.pdf

Abstract:

In a previous working paper I analyzed the Austrian and Doberman Pinscher strategy. The Austrian is an adaptive Put Writing strategy. One hedges the short position with a long Put with a lower strike. The Doberman is more aggressive. The long hedge is omitted. The risk is in both cases reduced by entry and exit conditions. The Affenpinscher uses the same general framework. But the hedging is done with long VIX Futures. There are several VIX Futures available. One selects the VIX Future with the lowest roll-value. The overall performance of the Affenpinscher is between the Austrian and Doberman Pinscher. The Pinscher strategies have generally an attractive performance. The best choice within the family is a matter of risk appetite. Revision 1 extends the historic simulation for the SPX Options till 2014-06-13.  As the original parameters are not changed we perform an out of sample test. The attractive properties of the strategy  are confirmed. Revision 1 is added before the Conclusion of the original paper. A similar update has been done for the other Pinscher strategies.

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#198 – Exploiting Term Structure of VIX Futures

Authors: Donninger

Title: Selling Volatility Insurance: The Sidre- and Most-Strategy

Link: http://www.godotfinance.com/pdf/VIXFuturesTrading_Rev1.pdf

Abstract:
This working-paper examines and improves a VIX-Futures calendar-spread strategy proposed in the literature. The strategy relies on the typical term-structure of VIX-futures. Additionally a naked short-selling strategy is considered. The strategies have similar  characteristics to selling Puts on the S&P-500. There is some risk, but also a lot of fun.  The strategies are  an interesting alternative investment-vehicle to boost the performance of a fund.

and …

Authors: Donninger

Title: VIX Futures Basis Trading: The Calvados-Strategy 2.0

Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2379985

Abstract:

I developed in a previous working paper the Sidre and Most-Strategy. The strategy relies on the typical termstructure of VIX futures. The Calvados is a refined and condensed version of these strategies. The starting point was a paper of Simon and Campasano. The authors demonstrate that the VIX futures basis does not have significant forecast power for the change in the VIX spot index, but does have forecast power for subsequent VIX futures returns. It is especially profitable to short VIX futures contracts when the basis is in contango. The original Calvados working paper presented improved metrics and parameter settings of the Simon&Campasano approach. The current working paper improves the original work in several points and extends the historic backtest. The overall patterns of the original results are reassured and improved upon. The Calvados is traded in the Sybil-Fund. It is so far the pick of the bunch. One gets a lot of fun for a medium dose of risk.

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#21 – Momentum Effect in Commodities
#22 – Term Structure Effect in Commodities

Authors: Benham, Walsh, Obregon

Title: Evaluating Commodity Exposure Opportunities

Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2602885

Abstract:

Commodities as an asset class have been in growing demand over the last 40 years, as investors that have traditionally held portfolios of stocks and bonds seek the ‘equity-like’ returns along with diversification potential and inflation hedging characteristics available through commodities investment. However, perhaps due to their relative complexity and the large remaining disagreements in the current literature about the fundamental drivers of commodities returns, investors do not universally agree on the merits of commodity investments. This paper begins by reviewing the existing theories and fundamental drivers of returns from commodity investments to better understand the risks that commodity investors are compensated for bearing. From this perspective we will evaluate existing methods of commodity investing with a focus on why the risk premia these strategies capture are likely to persist in the future.

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#20 – Volatility Risk Premium Effect

Authors: Li, Wang

Title: Option-Implied Downside Risk Premiums

Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2603857

Abstract:

This article examines downside risk premiums using S&P 500 index (SPX) options. Portfolios are constructed using the index options to replicate the downside risk factors and their average excess returns provide estimates of downside risk premiums. We show that all the market risk premium comes from the downside. The mimicking portfolio returns also show that most of the downside risk premium is associated with large market-level losses that are rarely observed. In contrast, investors seem to require little excess return for bearing moderate market-level losses. Therefore, the downside risk premium is largely a tail risk premium. We compare the downside risk premiums measured from stocks and the options to examine whether the risk is priced consistently across the two markets. Our evidence raises several concerns about the downside risk premium measures from the stock market. Overall, we find no robust evidence that downside risks are priced in the stock market in the same way as in the options market.

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#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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