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Crowding and tail risk in momentum returns

2020-10-01Working paper Open access
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dc.contributor.authorBarroso, Pedro
dc.contributor.authorEdelen, Roger M.
dc.contributor.authorKarehnke, Paul
dc.date.accessioned2022-05-17T12:35:39Z
dc.date.available2022-05-17T12:35:39Z
dc.date.issued2020-10-01
dc.description.abstractSeveral theoretical studies suggest that coordination problems can cause arbitrageur crowding to push asset prices beyond fundamental value as investors feedback trade on each others' emands. Using this logic we develop a crowding model for momentum returns that predicts tail risk when arbitrageurs ignore feedback effects. However, crowding does not generate tail risk when arbitrageurs rationally condition on feedback. Consistent with rational demands, our empirical analysis generally finds a negative relation between crowding proxies constructed from institutional holdings and expected crash risk. Thus our analysis casts both theoretical and empirical doubt on crowding as a stand-alone source of tail risk.pt_PT
dc.description.versioninfo:eu-repo/semantics/submittedVersionpt_PT
dc.identifier.urihttp://hdl.handle.net/10400.14/37608
dc.language.isoengpt_PT
dc.publisherSSRNpt_PT
dc.rights.urihttp://creativecommons.org/licenses/by/4.0/pt_PT
dc.subjectCrowded tradept_PT
dc.subjectDestabilizept_PT
dc.subjectMomentum tradingpt_PT
dc.subjectInstitutional investorspt_PT
dc.subjectCrash riskpt_PT
dc.titleCrowding and tail risk in momentum returnspt_PT
dc.typeworking paper
dspace.entity.typePublication
oaire.citation.endPage50pt_PT
oaire.citation.startPage1pt_PT
oaire.citation.titleCrowding and tail risk in momentum returnspt_PT
rcaap.rightsopenAccesspt_PT
rcaap.typeworkingPaperpt_PT

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