Percorrer por autor "Belli, Nicola"
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- Residual reversal as an independent anomaly : a risk-adjusted approach to return consistencyPublication . Belli, Nicola; Karehnke, PaulThis study analyzes residual reversal strategies as an independent alternative to conventional reversal methods, extensively studied in prior literature. Despite broad evidence supporting short-term conventional reversals, the robustness and global factor-neutrality of residual reversal strategies remain partially underexplored. We investigate whether these residual-based strategies exhibit greater return stability across regions and reduced exposure to global factors compared to the conventional counterparts. Using US, European, and Asian monthly equity returns from 1973 to 2023, conventional reversal methods are compared with their residual versions, which temper their exposures to the CAPM, Fama-French three-factor, and five-factor models. The residual strategies are constantly generating higher risk-adjusted returns in short-horizon, equal-weighted portfolios, among the different regions implemented. Those findings do not hold for the long-term horizon implementation. Additional regressions verify the residual reversal's partial statistical independence from the conventional counterpart, generating stable alphas. These results are also confirmed for factor exposure in the short term, demonstrated to be a factor-neutral anomaly with cross-market stability. However, the fading reversal performance over time demonstrates the presence of a sensitivity to changing market liquidity conditions.