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Open AccessArticle

The Distribution of Cross Sectional Momentum Returns When Underlying Asset Returns Are Student’s t Distributed

1
Discipline of Finance, Codrington Building (H69), The University of Sydney, NSW 2006, Australia
2
Trinity College, University of Cambridge, Cambridge CB2 1TQ, UK
*
Author to whom correspondence should be addressed.
J. Risk Financial Manag. 2020, 13(2), 27; https://doi.org/10.3390/jrfm13020027
Received: 13 January 2020 / Revised: 27 January 2020 / Accepted: 31 January 2020 / Published: 5 February 2020
(This article belongs to the Special Issue Modern Portfolio Theory)
In Kwon and Satchell (2018), a theoretical framework was introduced to investigate the
distributional properties of the cross-sectional momentum returns under the assumption that the
vector of asset returns over the ranking and holding periods were multivariate normal. In this
paper, the framework is extended to derive the corresponding results when the asset returns are
multivariate Student’s t. In particular, we derive the probability density function and the moments of
the cross-sectional momentum returns and examine in detail the special case of two underlying assets
to demonstrate that many of the salient features reported in the empirical literature are consistent
with the theoretical implications.
Keywords: cross sectional momentum; student’s t distribution; investment strategy cross sectional momentum; student’s t distribution; investment strategy
MDPI and ACS Style

Kwon, O.K.K.; Satchell, S. The Distribution of Cross Sectional Momentum Returns When Underlying Asset Returns Are Student’s t Distributed. J. Risk Financial Manag. 2020, 13, 27.

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