Momentum Horizons
Project Description
Momentum is one of the most pervasive anomalies in financial markets, yet its underlying mechanisms remain debated. Building on recent advances in the literature, this project seeks to disentangle the relative contributions of underreaction and overreaction across different momentum formation horizons. By incorporating technical trading indicators as proxies for shortterm overreaction and by constructing orthogonalized momentum measures, the project aims to provide a new framework for understanding why momentum persists as an enduring return pattern. Expected outcomes include academic publications as well as replicable tools for momentum decomposition.
Relevance to Liechtenstein
The project is highly relevant for Liechtenstein as a financial centre with a strong asset management industry. Momentum strategies are widely used by investment funds, but their profitability is sensitive to market conditions and investor behaviour. By clarifying the drivers of momentum and developing robust indicators, this project contributes to the design of more reliable trading strategies and portfolio management tools. The availability of a replicable decomposition framework also strengthens the connection between academic research and practice in Liechtenstein, providing local institutions with innovative analytical methods.
