Percorrer por autor "Tavares, Sofia Gamaliel Alves"
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- Downside volatility-management of the industry momentum strategyPublication . Tavares, Sofia Gamaliel Alves; Barroso, Pedro MonteiroMany studies have shed light on the pervasive evidence supporting the benefits of managing the momentum strategy’s risk: it is proven to generate substantial gains in performance and to considerably reduce the strategy’s pronounced crash risk. This study contributes to existing literature by investigating the effects of volatility management in the context of the industry variation of the momentum strategy, instead of the traditional strategy using individual stocks. More specifically, it explores the effects of using a downside volatilitymanagement scheme – computed using exclusively negative returns – and compares it to the traditional total volatility measure. Additionally, it analyses where the managed strategies’ enhanced performance stems from by decomposing it into two components: volatility timing and return timing. Managing the industry momentum strategy’s risk is shown to provide benefits for investors, showcasing significant increases in performance, though not as prono unced as in individual stock momentum. However, downside volatilitymanagement does not appear to outperform that using total volatility: it seems that, in the case of momentum, downside volatility alone may not adequately capture the full risk associated with the strategy. When decomposing the sources of the added performance of the managed momentum strategies, they exhibit positive return and volatility timing components, opposed to most factors and anomalies in the market . Volatility timing stands as the main driver of the resulting additional performance.