The Evaluation of the Managed Momentum Strategy in the Listed Companies on Tehran Stock Exchange

Momentum factor is known as a one of the pervasive factor that can explain the returns of stock. This Strategy challenge efficient Market hypothesis by creating opportunity to earn excess returns as a anomaly in the level of national Market. It has a dark side too. It is shown that in the time of the market crashes (financial crises) it may be several years' returns of the strategy of momentum can be eliminated. In this research for explaining of the momentum crashes, we use high volatility of momentum risk by estimating of realized volatility of daily momentum returns in Tehran Stock Exchange. The results show that when we scale on the base of the target standard deviation, we can manage the momentum risk. Therefore we can see decreasing in standard deviation from 45% to 31% and negative skew from -2.5% to 1.5%. Before the scaling, we saw that the Sharp ratio was 36% and after the scaling it increased and received to 53%. So the results of research show that managed momentum risk can eliminate the risk of momentum crashes in Tehran Stock Exchange.