Risk adjustment and trading strategies

• 成果类型: Article
• 署名作者: Ahn, DH; Conrad, J; Dittmar, RF
• 署名单位: Indiana University System; Indiana University Bloomington; University of North Carolina; University of North Carolina Chapel Hill
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhg001
• 发表日期: 2003
• 页码: 459
• 关键词: PORTFOLIO PERFORMANCE; SECURITY MARKET; asset; returns; expectations; arbitrage; models; tests

摘要

We assess the profitability of momentum strategies using a stochastic discount factor approach. In unconditional tests, approximately half of the strategies' profitability is explained. In conditional tests we see a further slight decline in profits. We argue that the risk of these strategies should be increasing in the market risk premium. Empirically, while their risk measures estimated relative to the stochastic discount factor behave as predicted, market betas do not; thus capital asset pricing model (CAPM)-like benchmarks may lead to incorrect inferences. Given that our nonparametric risk adjustment explains roughly half of momentum strategy profits, we cannot rule out the possibility of residual mispricing.