Momentum crash,credit risk and optionality effects in bear markets and crisis periods: evidence from the US stock market |
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| Authors: | Klaus Grobys |
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| Affiliation: | Department of Accounting and Finance, University of Vaasa, Vaasa, Finland |
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| Abstract: | This study explores whether the credit risk anomaly exhibits option-like behaviour similar to the momentum anomaly. It finds that the inverted credit risk spread indeed displays option-like behaviour in bear market states. Unlike a momentum portfolio, which is effectively a short call option on the market, an inverted credit risk portfolio appears to be a long call option on the market. |
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| Keywords: | Credit risk optionality momentum bear market states financial crisis |
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