Advanced

Risk-Managed Momentum in Europe

Nizov, Anton LU (2017) NEKN01 20171
Department of Economics
Abstract
This thesis sets out to evaluate a risk-managed momentum strategy in the European stock market. The recent performance of momentum in Europe is first evaluated. A momentum premium still exists in Europe but the strategy suffered large losses in 2009. A risk-managed momentum portfolio is created by dynamically scaling the exposure to momentum based on a monthly volatility forecast. The risk-managed strategy is evaluated by comparing its performance to the original momentum portfolio. Risk management doubles the Sharpe ratio of the momentum portfolio and reduces tail risk. The greatest benefit of risk management comes from avoiding momentum crashes. The strategy increases the Sharpe ratio in all subsamples and the results are robust in... (More)
This thesis sets out to evaluate a risk-managed momentum strategy in the European stock market. The recent performance of momentum in Europe is first evaluated. A momentum premium still exists in Europe but the strategy suffered large losses in 2009. A risk-managed momentum portfolio is created by dynamically scaling the exposure to momentum based on a monthly volatility forecast. The risk-managed strategy is evaluated by comparing its performance to the original momentum portfolio. Risk management doubles the Sharpe ratio of the momentum portfolio and reduces tail risk. The greatest benefit of risk management comes from avoiding momentum crashes. The strategy increases the Sharpe ratio in all subsamples and the results are robust in international markets. (Less)
Please use this url to cite or link to this publication:
author
Nizov, Anton LU
supervisor
organization
course
NEKN01 20171
year
type
H1 - Master's Degree (One Year)
subject
keywords
momentum, momentum crashes, risk-managed momentum
language
English
id
8925261
date added to LUP
2017-09-12 11:53:34
date last changed
2017-09-12 11:53:34
@misc{8925261,
  abstract     = {This thesis sets out to evaluate a risk-managed momentum strategy in the European stock market. The recent performance of momentum in Europe is first evaluated. A momentum premium still exists in Europe but the strategy suffered large losses in 2009. A risk-managed momentum portfolio is created by dynamically scaling the exposure to momentum based on a monthly volatility forecast. The risk-managed strategy is evaluated by comparing its performance to the original momentum portfolio. Risk management doubles the Sharpe ratio of the momentum portfolio and reduces tail risk. The greatest benefit of risk management comes from avoiding momentum crashes. The strategy increases the Sharpe ratio in all subsamples and the results are robust in international markets.},
  author       = {Nizov, Anton},
  keyword      = {momentum,momentum crashes,risk-managed momentum},
  language     = {eng},
  note         = {Student Paper},
  title        = {Risk-Managed Momentum in Europe},
  year         = {2017},
}