Risk-Adjusted Momentum Factor - US

Approach

Risk-adjusted momentum uses a rolling analysis of time series model: 50 days, 100 days, and 200 days. This estimates the coefficients over a rolling window and scaled by the 200 days rolling volatility.

Factors Evaluated

In addition to considering price and return, risk-adjusted momentum takes into consideration a volatility scale.

• - Period = 50, it was adjusted by the 50 rolling days of standard deviation
• - Period = 100, it was adjusted by the 100 rolling days of standard deviation
• - Period = 200, it was adjusted by the 200 rolling days of standard deviation
• - Combined risk-adjusted momentum

Methodology

We applied the aforementioned risk-adjusted momentum metrics to a universe of the largest 500 US equities by market capitalization and ranked each stock on its risk-adjusted momentum factor. We then divided the universe into 10 quantiles of stocks, with the top quantile (Q_10) representing stocks with the highest value of that factor and the bottom quantile (Q_1) representing the lowest value of that factor.

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