Lower volatility with idiosyncratic momentum: Evidence from Sweden

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bachelor_Mattinen_Miikka_2023.pdf (678.51 KB)
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School of Business | Bachelor's thesis
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Date
2023
Major/Subject
Mcode
Degree programme
Rahoitus
Language
en
Pages
23
Series
Abstract
This study examines the existence of idiosyncratic momentum anomaly in Sweden from 1.1.2000 to 1.1.2020. The idiosyncratic momentum zero-investment portfolio yielded greater risk-adjusted returns overall compared to momentum zero-investment portfolio. The idiosyncratic momentum also yielded statistically significant alpha for 1- and 12- month holding periods, while momentum yielded statistically significant alpha for 1- and 3- month holding periods. Idiosyncratic momentum also had statistically significant lower volatility compared to momentum. The idiosyncratic momentum also had lower crash risk during the study period. These findings suggest that the idiosyncratic momentum strategy yields similar returns as momentum, but with significantly lower volatility.
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Thesis advisor
Luotonen, Niilo
Keywords
volatility, idiosyncratic momentum, momentum, idiosyncratic volatility
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