Avoiding Momentum Crashes: Dynamic Momentum and Contrarian Trading

@article{Dobrynskaya2017AvoidingMC,
  title={Avoiding Momentum Crashes: Dynamic Momentum and Contrarian Trading},
  author={V. Dobrynskaya},
  journal={Mutual Funds},
  year={2017}
}
High momentum returns cannot be explained by risk factors, but they are negatively skewed and subject to occasional severe crashes. I explore the timing of momentum crashes and show that momentum strategies tend to crash in 1-3 months after the local stock market plunge. Next, I propose a simple dynamic trading strategy which coincides with the standard momentum strategy in calm times, but switches to the opposite contrarian strategy after a market crash and keeps the contrarian position for… Expand
Does Momentum Trading Generate Extra Downside Risk?
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