Joint work with Hannes Mohrschladt and Susanne Siedhoff

Abstract: We propose a purely cross-sectional momentum strategy that avoids crash risk and does not depend on the state of the market. To do so, we simply split up the standard momentum return over months t-12 to t-2 at the highest stock price within this formation period. Both resulting momentum return components predict subsequent returns on a stand-alone basis. However, the long-short returns associated with the first component completely avoid negative skewness as the momentum crashes are driven by the second component's short leg dependence on recent loser stocks. The crash-resilient strategy allows for significant momentum profits even in recent years, avoids the latest Covid-19 momentum crash, and is valid in both the US and international stock markets.

Available at SSRN