#116 – Time Series Momentum Effect
Dudler, Gmuer, Malamud: Risk Adjusted Time Series Momentum
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2457647
Abstract:
We introduce a new class of momentum strategies that are based on the long-term averages of risk-adjusted returns and test these strategies on a universe of 64 liquid futures contracts. We show that this risk adjusted momentum strategy outperforms the time series momentum strategy of Ooi, Moskowitz and Pedersen (2012) for almost all combinations of holding- and look-back periods. We construct measures of momentum-specific volatility (risk), (both within and across asset classes) and show that these volatility measures can be used both for risk management and it momentum timing. We find that momentum risk management significantly increases Sharpe ratios, but at the same time leads to more pronounced negative skewness and tail risk; by contrast, combining risk management with momentum timing practically eliminates the negative skewness of momentum returns and significantly reduces tail risk. In addition, momentum risk management leads to a much lower exposure to market, value, and momentum factors. As a result, risk-managed momentum returns offer much higher diversification benefits than the standard momentum returns.
#140 – Ramadan Effect
Al-Issis: THE IMPACT OF RELIGIOUS EXPERIENCE ON FINANCIAL MARKETS
https://econ.duke.edu/uploads/assets/Research/ERID/Al-Ississ%20Final%20Faith%20in%20Muslim%20Financial%20Markets%20Mar%202010-1.pdf
Abstract:
In spite of the important role religion plays in peoples’ lives, its impact on financial markets is seldom researched. This study examines the effect of religious experience during the Muslim holy days of Ramadan and Ashoura on the daily returns and trading volumes of 17 Muslim financial markets. Muslim holy days are especially conducive to isolating the elusive effect of faith and decoupling it from potential contaminants. The study documents statistically significant drops in the trading volume and changes in daily stock returns associated with religious experiences on these holy days. The effect on returns is not unidirectional as Ramadan yields a positive impact on daily returns while Ashoura is associated with a negative effect. Ramadan’s more sacred days are associated with a higher magnitude effect culminating on its holiest day,Ramadan 27th. The study utilizes the heterogeneity of worship intensity within the month of Ramadan to validate that the documented effect is indeed a result of religious experience rather than non-faith aspects of the holy days.
Ramezani, Poughajan, Mardan: Studying Impact of Ramadan on Stock Exchange Index: Case of Iran
http://www.engineerspress.com/pdf/WSJ/2013-12/a5%20%28WSJ-1311205%29.pdf
Abstract:
One of the human characteristic and features is its beliefs. Feature which has important effect on lifestyle, culture, society and decisions making – even economic decisions. Iranian as people that most of them are Muslim has Islamic beliefs. Ramadan is peak of religious beliefs in Islam development in comparison to other beliefs like economic beliefs and soon. In this research, impact of Ramadan as worship and devotion month is exami ned on stock exchange index. Results of this research showed that there is positive and significant relationship between changes of stock exchange index and Ramadan, Shawwal and Rabi Al – Awwal months. However there is negative and significant relationship between stock exchange index and Jumada II, Rabi, Muharram and Rajab months. We examine this relationship for other month and results indicate that there isn’t significant relationship for Jumada al – Awwal, Saffar, Shaban, Dhu al – Hijja and Dhu al Qaeda.
#170 – US Holiday Effect in EU Markets
Bladh, Sandberg: The US Holiday Effect
http://arc.hhs.se/download.aspx?MediumId=1835
Abstract:
This paper investigates four Nordic stock indices on US holidays, days when the New York Stock Exchange is closed due to holiday. We provide evidence for a US holiday effect that on average cause large positive returns and low volumes. The returns are particularly strong after positive close of the NYSE the previous day and highly significant for the Swedish and Finnish market. Our results persist after controlling for other anomalies such as the day of the week effect and the turn of the month. We conclude that the effect exist and provide a qualitative explanation for the effect based on a higher share of trading being conducted by noise traders that drive abnormal returns. The small number of US holidays makes it a less feasible trading strategy and from 1990 one would have gained 244.4% (5.5% compound annual rate) by investing in the OMXS30 index on close the day before US holiday and liquidating on close at US holiday and by holding the risk free rate on otherdays. However we think the effect is important to consider in the timing of investments and since it is indicative for differences between institutional investors and noise traders.
#210 – Adaptive Asset Allocation
Keller: Momentum, Markowitz, and Smart Beta: A Tactical, Analytical and Practical Look at Modern Portfolio Theory
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2450017
Abstract:
In this paper we will try to improve on the Modern Portfolio Theory (MPT) as developed by Markowitz (1952). As a first step, we combine the MPT model with generalized momentum (see Keller 2012) in order to arrive at a "tactical" MPT. In our second step, we will use the single index model (Elton, 1976) to arrive at an analytical solution for a long-only maximum Sharpe allocation. We will call this the MAA model, for Modern Asset Allocation. In our third step, we use shrinkage estimators in our formula for asset returns, volatilities and correlations to arrive at practical allocations. In addition, as a special cases, we arrive at EW (Equal Weight), Minimum Variance (MV), Maximum Diversification (MD) and (naïve) Risk Parity (RP) submodels of MAA. These EW, MV, MD and RP models are sometimes called "smart-beta" models.We illustrate all these different models on three universes consisting of respectively 10 and 35 global ETFs, and 104 US stocks/bonds, with daily data from Jan. 1998-Dec. 2013 (16 years), monthly rebalanced. We show that all these models beat the simple EW model con-sistently on various return /risk criteria, with the general MAA model (with return momentum) also beats nearly all of the "smart beta" models.
