NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Downside Risk and the Momentum Effect

Andrew Ang, Joseph Chen, Yuhang Xing

NBER Working Paper No. 8643
Issued in December 2001
NBER Program(s):   AP

Stocks with greater downside risk, which is measured by higher correlations conditional on downside moves of the market, have higher returns. After controlling for the market beta, the size effect and the book-to-market effect, the average rate of return on stocks with the greatest downside risk exceeds the average rate of return on stocks with the least downside risk by 6.55% per annum. Downside risk is important for explaining the cross-section of expected returns. In particular of the profitability of investing in momentum strategies can be explained as compensation for bearing high exposure to downside risk.

download in pdf format
   (336 K)

email paper

A non-technical summary of this paper is available in the April 2002 NBER digest.  You can sign up to receive the NBER Digest by email.

This paper is available as PDF (336 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w8643

Published: Ang, Andrew, Joe Chen and Yuhang Xing. “Downside Risk." Review of Financial Studies 19 (2006): 1191-1239.

Users who downloaded this paper also downloaded these:
Grinblatt and Han w8734 The Disposition Effect and Momentum
Ang, Chen, and Xing w11824 Downside Risk
Jegadeesh and Titman w7159 Profitability of Momentum Strategies: An Evaluation of Alternative Explanations
Chabot, Ghysels, and Jagannathan w14500 Price Momentum In Stocks: Insights From Victorian Age Data
Pastor and Stambaugh w8462 Liquidity Risk and Expected Stock Returns
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us