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Crowded Trades, Short Covering, and Momentum Crashes

Philip Yany
Princeton University

November, 2013

Abstract

Despite momentum’s strong historical performance, its returns have large negative skewness
and occasionally experiences persistent strings of sharp negative returns, referred as “momentum
crashes” in the recent literature. I argue that momentum crashes are due to crowded trades
which push prices away from fundamentals leading to strong reversals, and exacerbated by limits
of arbitrage being more severe in the short-leg due to impediments to short selling. Using short
interest and institutional ownership data together to measure the “crowdedness”of momentum,
I show that momentum crashes can be avoided in the cross section by shorting only non-crowded
losers. There is considerably more short-covering during times when momentum fails. I show
using high frequency short sale transactions data that short covering is especially severe in the
crowded loser portfolio. A placebo test using a set of 63 futures contracts show that momentum
crashes do not exist in futures market after market exposure is correctly hedged, which is
consistent with my hypothesis.

I am indebted to my adviser Harrison Hong for invaluable advice and encouragement. I am very grateful to
Jakub Jurek and David Sraer for their guidance and support. I would also like to thank Valentin Haddad, Ji Huang,
John Kim, Hyun Song Shin, Jose Scheinkman, and Wei Xiong for helpful comments and discussions. All errors are
my own.
y
Email: pyan@princeton.edu

1 Introduction

Momentum refers to a long-short investment strategy that buys past winners and sells past losers
(Jegadeesh and Titman (1993)), and its performance had been strong over the past 80 years (e.g.,
Fama and French (2008); Israel and Moskowitz (2012); Jegadeesh and Titman (2001)). In U.S.
equities, a winner minus losers long-short portfolio had an average annualized excess return of
17.52% per year, an annualized Sharpe ratio of 0.86, and earns about a 1% alpha per month
using the Fama and French (1993) three factor model.1 Compared with the U.S. market excess
return which averaged 6.42% with a Sharpe ratio of 0.43 over the same period, momentum o¤ered
attractive returns and has been used by many quantitative and sophisticated investors. Momentum
has also been shown to exist in many other asset classes and geographic locations (e.g., Asness,
Moskowitz, and Pedersen (2013); Erb and Harvey (2006); Moskowitz, Ooi, and Pedersen (2012);
Okunev and White (2003); Rouwenhorst (1999)). The pervasiveness of momentum poses great
challenges to the e¢ cient market hypothesis as it violates even the weakest form of market e¢ ciency,
which posits that future prices cannot be predicted from past prices (Fama (1970)). Moreover, the
momentum anomaly is di¢ cult to reconcile using risk-based stories (e.g., Fama and French (1996,
2008); Jegadeesh and Titman (2001)).
Despite momentum’s strong historical performance, its returns have large negative skewness and
experiences periods of large drawdowns referred as momentum crashes (Barroso and Santa-Clara
(2013); Daniel and Moskowitz (2013)). Figure 1 depicts two of the most notable crashes started
in July 1932 and March 2009, which had a cumulative portfolio loss of 89% and 66% respectively
over just a two month period. Other major drawdown subperiods are also plotted in Figure 1.
Overall, most of these crashes occurred at the point of market rebound preceded by periods of
market downturn.
Daniel and Moskowitz (2013) point out that most of the crashes are driven asymmetrically by
the short-leg of the strategy, occurring during market recovery following bear markets. Table 1
lists the twelve worst months for the momentum strategy as well as the one month return for the
momentum, winner, and loser portfolio. It is clear that the large negative returns experienced by
the momentum strategy are driven predominately by the losers having a much greater rebound
compared with the winners. They conclude that a conditionally high premium attached to the
option-like payo¤ of the loser portfolio results in momentum crashes.
Several approaches had been taken in the literature aiming to explain and mitigate momentum
crashes (e.g., Barroso and Santa-Clara (2013); Daniel, Jagannathan, and Kim (2012); Daniel and
Moskowitz (2013)). The literature had focus extensively on timing the momentum factor: determin-
ing an ex-ante optimal allocation between the momentum factor and the risk-free asset. However,
little explanations have been provided as to why momentum crashes were driven asymmetrically
by the short-leg, and no economic forces and mechanisms had been documented in explaining the
optionality embedded in the past-loser portfolio.

1
Sample period used here is post WWII to the end of 2008.

1

July 1926 − Dec 1934 Jan 1935 − Dec 1938 Jan 1939 − Dec 1940

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Jan 1969 − Dec 1970 Jan 2000 − Dec 2002 Jan 2003 − Dec 2012
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Momentum Market

Figure 1: Cumulative returns to momentum and market portfolio

Table 1: Worst Momentum Months

One Month Return
Month Momentum Losers Winner Month Momentum Losers Winner
1932m8 -73.32% 92.11% 18.79% 2009m4 -45.51% 45.36% -0.15%
1932m7 -59.16% 76.49% 17.33% 2001m1 -41.76% 35.52% -6.23%
1933m4 -33.85% 63.81% 29.96% 2009m3 -38.44% 43.24% 4.80%
1939m9 -32.94% 44.42% 11.48% 2009m8 -26.56% 26.75% 0.19%
1931m6 -32.41% 40.93% 8.52% 2009m5 -21.05% 23.28% 2.23%
1938m6 -32.17% 43.91% 11.74% 2002m11 -20.37% 22.79% 2.42%

2

This paper explains momentum crashes and the asymmetry in return contributions to these
crashes between the winners and losers. My hypothesis is based on two elements. First, momentum
is prone to crowded trades (Hong and Stein (1999); Stein (2009)). Excessive momentum trading
activities push prices beyond fundamental value, which lead to a …re-sale of the momentum strategy
when arbitrageurs unwind upon su¤ering losses. Second, more limits of arbitrage (Shleifer and
Vishny (1997)) in short positions compared with levered long positions ampli…es the …re-sale e¤ect
of the loser portfolio through short covering (Hong, Kubik, and Fishman (2012)).
Momentum is prone to crowded trades because it is a positive feedback trading strategy with
no fundamental anchor (Stein (2009)). The e¤ects of overcrowding in momentum strategies are
described in Stein (2009) and Hong and Stein (1999) with a static and dynamic setting respec-
tively. Consider an environment where there are “newswatchers” representing informed traders
who underreact to fundamental information, e.g., due to slow information di¤usion (Hong and
Stein (1999)). If only newswatchers are present, then there is underreaction in general which gives
rise to continuation at short-horizons. The continuation in returns creates an arbitrage opportu-
nity where arbitrageurs exploit by engaging in momentum trading. Intuitively, rational arbitrageurs
should base their intensity of trading on the total arbitrage capacity. However, the uncertainty in
the amount of capital devoted to momentum trading makes it possible that arbitrageurs overcor-
rect the initial underreaction by overcrowding the momentum trade and push asset prices beyond
fundamental values. Since arbitrageurs’ positions are often levered, initial losses will lead to un-
winding of their positions causing a …re-sale of the strategy when the arbitrageurs are “late in the
momentum-cycle”.
I argue that the …re-sale e¤ect for the loser stocks is stronger than that of the winners because
there are more limits of arbitrage in shorting than levered long. First, shorting is more di¢ cult than
buying, which leads to short-sellers holding imperfectly diversi…ed portfolios of short positions. A
short-seller …rst needs to locate the shares for borrowing which may be di¢ cult (D’Avolio (2002)).
It is also di¢ cult for short-sellers to hold on to their established positions since the lender of the
shares may recall the loan (D’Avolio (2002)) or increase the lending fees (Engelberg, Reed, and
Ringgenberg (2013)) at anytime. Recalls and increases in lending fees may occur at inopportune
times forcing short sellers to liquidate short positions that would’ve been pro…table if they were
able to hang on to their positions. Indeed, Savor and Gamboa-Cavazos (2011) show empirically
that short sellers close out trades that are ex-post pro…table in response to initial losses to their
short positions. Therefore, short covering due to limits of arbitrage will amplify the initial price
increase in the loser stocks (Hong et al. (2012)), and this e¤ect should be the strongest when market
rebounds since it is likely that a large fraction of the loser portfolio is hit by positive shocks, and
also because short-sellers are in general reluctant to bet against the market (Lamont and Stein
(2004)). Second, there is naturally more unwinding of positions in shorting compared with levered
long. This is because while an adverse price movement for a short position leads to an increase
of portfolio exposure, it decreases portfolio exposure for long positions.2 Therefore, internal risk

2
For example, suppose we establish a short position for a stock trading at $10 per share with $100 of initial capital

3

The impact of short covering is further exacerbated due to imperfect diversi…cation of short positions and massive increases in portfolio exposure in loser stocks facing positive shocks. My measure of crowding di¤ers from LSV’s herding measure in two important ways. we buy 13 shares costing $130 and we have $100 in the margin account. Shleifer. our margin account will be marked down the same way to $87. In this case. This unwinding has an asymmetric e¤ect on the long and short leg of the portfolio due to more limits of arbitrage in the short-leg. we would need to cover 2. our margin account would be marked down to $87. Moreover. momentum traders lose money on their trades when momentum su¤ers from overcrowding. Since many quantitative investors engaging in momentum use short sales in their construction of momentum portfolios. 3 I show in Section 7 that crowding exists in winner stocks as well. They will be forced to liquidate some of their positions since their strategy is employed with leverage. First. We would only need to sell 0. and substantially outperform both the crowded momentum portfolio and also the base- line portfolio. To summarize. The implied leverage for this position is now ($11 13)=$87 1 = 64%. Second. my measure of crowding is a double sort on short interest ratio (SIRi. I split the universe of loser stocks into a crowded and non-crowded portfolio using the crowd- ing measure described above. If the price increases by 10% to $11 per share. Consistent with my hypothesis. my measure incorporates information in short selling. Both measures aim to capture stocks with traders ending up on the same side of the market. the crowded portfolio experiences substantial skewness and drawdown. On the other hand.1. and Vishny (1992).t 1 and high EXITi.t 1) computed using institutional ownership data from the SEC 13F …lings. The re…ned non-crowded momentum strategy does not su¤er from momentum crashes. but our implied leverage would only be ($9 13)=$87 1 = 34%. information regarding short selling is critical in gauging the intensity of momentum trading by these investors. my measure focuses only on the level of selling by institutions. but with a much smaller magnitude. if we were long 13 shares of the stock but the price drops by 10%.t 1: This measure is similar to the herding measure used in Lakonishok. The main focus of this paper is to identify loser stocks that are subject to overcrowding by momentum traders. the non-crowded loser portfolio does not display any conditional premium during market rebound as documented by Daniel and Moskowitz (2013) for the baseline momentum and an initial leverage of 30%. A crowded loser portfolio therefore consists of loser stocks having high SIRi.43 shares of our long position to maintain our initial leverage. large negative skewness.3 A crowded momentum loser stock is sold heavily by both short selling arbi- trageurs and institutions holding long positions.t 1) and the exit rate of institutional investors (EXITi. where LSV focus on net buying.management or leverage targeting from arbitrageurs will naturally lead to more …re-sale on the short-leg when prices move in unfavorable directions. 4 . following Hong and Jiang (2011). and generally underperform the non-crowded portfolio. Without posting additional capital in the margin account. while LSV’s herding measure captures only trading by existing long investors. The exit variable is de…ned as the fraction of total shares outstanding that were completely liquidated by institutional investors in the previous quarter.72 shares of our position to maintain a leverage of 30%. As such. including new entries of institutions will contaminate the crowding measure in the face of noise traders and inattentive investors. As described later in Section 3.

I employ a placebo test using a set of 63 futures contracts in commodities. currencies. Section 8 concludes. 2 Data The main empirical analysis for the U. and show that the crowded loser portfolio experiences signi…cantly more short-covering not only during mo- mentum crashes but also in the cross-section throughout the entire sample. and NASDAQ stocks. Section 2 describes the main data used in the construction of the equity momentum portfolios and outlines the main testable predictions of the paper. and non-crowded portfolios. Finally. momentum strategies in futures markets do not su¤er from momentum crashes and display no optionality once dynamic market exposure is properly hedged. Section 3 describes my measure of crowded trades in momentum. Section 7 discusses several extensions of my empirical results. I then employ hand collected short interests data from 1931 to 1934 and show that the outcome of the large momentum crash in 1932 is consistent with my hypothesis. The baseline momentum decile portfolios are constructed monthly using the past 12 months return with NYSE breakpoints. Lou and Polk (2013) identify crowded trades contemporaneously by exploiting the abnormal weekly return correlations between individual momentum stocks and the momentum portfolio. bonds. I include only common shares (CRSP share-code 10 or 11) from all NYSE. crowded. More- over. and examines the per- formance of the baseline. Section 5 documents the event-time path of short interests and shows the unwinding of arbitragers from momentum upon su¤ering losses during times when momentum fails. I require that the …rm has a valid share price. Hanson and Sunderam (2013) use the cross section variations in short interests to measure the level of crowding in momentum. and show that an increase capital ‡ow lowers the strategy return. Section 4 provides direct evidence of short covering using high frequency NYSE TAQ Short Sales data. Following the standard procedures for constructing the momentum portfolio. valid number of 5 . Evidence of crowded trades in momentum are also documented in the recent literature. The full sample period for the equity data is January 1980 to September 2012. Consistent with my hypothesis. Data on daily and monthly stock returns are from the Center of Research in Security Prices (CRSP). since there is no asymmetry between short- ing and buying in futures markets. equity market is done by combining four main datasets described below.S. and excluding the most recent month consistent with the literature to avoid the one-month reversal e¤ect. Section 6 performs a placebo tests and re- peats the analysis of momentum crashes in equities in futures markets. Using an event-time methodology similar to Hanson and Sunderam (2013).strategy. and indices. NYSE MKT (formerly known as the AMEX). I back out the total number of shares covered by short sellers throughout the month by exploiting high frequency short sale transactions for all NYSE stocks from 2005-2012. I show that loser stocks su¤er from signi…cant abnormal short-covering during times when momentum fails. The rest of the paper is organized as follows.

Quarterly book values are obtained from COMPUSTAT’s total common equity. This data source allows us to compute institutional exit rates (Hong and Jiang (2011)) to capture selling from institutions as one part of my measure of crowded trades. the non-crowded loser portfolio is not market state dependent and therefore displays no option-like behavior as documented by Daniel and Moskowitz (2013) for the baseline loser portfolio. especially during times when momentum crashes. and Rouwenhorst (2013) by rolling on the 12th business day of the expiration month. and displays better performance in general. which is short interest normalized by total number of shares outstanding.1 Testable Predictions This section summarizes the main testable predictions of this paper. Quarterly data on institutional holdings is obtained from the Thompson Reuters Institutional 13F Holdings. Prediction 3 After market exposure is properly hedged.shares outstanding as of the formation date. currencies. and indices from Bloomberg. Prediction 4 Loser stocks that are crowded su¤ er more from short-covering than non-crowded losers. less negatively skewed. For each futures instrument. For the placebo test in futures markets. Prediction 2 Hedging dynamic market exposure does not eliminate momentum crashes in the crowded portfolio. (2013). Monthly short interest data for NYSE. It includes all mandatory reported holdings to the SEC by money managers and institutions with greater than $100 million of securities under discretionary management. Short interest represents the total number of uncovered shares sold short for settling on or before the 15th of each month. I employ data for a set of 63 futures contracts in com- modities. The winner and loser portfolio are then constructed as the value-weighted portfolio of all winners and losers respectively. I construct a continuous front-month excess return series following Gorton. The sample period for futures data is January 1980 to June 2013. 6 . and NASDAQ stocks is obtained from COMPUSTAT and Bloomberg. Additional data will be discussed in the appropriate sections. The short interest ratio. Hayashi. bonds. Prediction 1 Momentum strategy constructed with the short-leg re…ned to the crowded losers is more crash prone with larger drawdowns and more negatively skewed. Gompers and Metrick (2001) contains a detailed description of this data. 2. I compute the book-to-market ratio (BMR) using the most recently available price up to one year before the formation period as done by Asness et al. will be used as the second part of my measure of crowded trades. NYSE MKT. and that there be a minimum of 8 valid monthly returns over the past 11 months formation period. momentum strategy con- structed with the non-crowded losers should display smaller drawdowns.

but the magnitude is much less severe. drawdowns. Stock i is therefore likely to be crowded by momentum traders pushing price below its fundamental value. Clearly.Prediction 5 (Deleveraging and Unwinding) There should be abnormal unwinding of arbitrage capital from the momentum portfolio at a strategy level when momentum fails. The loser stocks within the highly-shorted group are then further re…ned based on EXITit 1: The crowded losers are stocks that belong to the top 20th percentile of EXITit 1 within the highly-shorted group. The remaining stocks in the highly-shorted loser group are labeled as non-crowded. SIR can also be low due to shorting being very costly with a relatively binding short-sale 7 . I keep the long-leg of the portfolio and re…ne the short- leg using SIR and EXIT: Figure 1 visualizes the construction of the double-sort this paper employs to identify the crowded and non-crowded losers. SIR will be low for stocks that have very low demand for shorting. skewness. The focus of this paper is to re…ne the short-leg of the strategy. it means that the stock has already undergone heavy selling both from arbitrageurs who are able to short. and arbitrageurs who short them run greater risk of being “late in the momentum cycle” as described by Hong and Stein (1999). At the beginning of month t. if both SIRit 1 and EXITit 1 are high for a loser stock i. In the beginning of month t.2 that crowding exists in the long-leg. Selling activities by short-sellers are measured by the monthly short interest ratio (SIR) de…ned as short interest Short Interest Ratio SIRit = (1) # shares outstanding The level of selling from existing long investors is captured by my Exit measure de…ned as # of shares completely liquidated by an institutional investors EXITit = (2) # shares outstanding The EXIT variable is measured quarterly and is de…ned as the total number of shares sold by institutional investors who completely exited the market for the stock.1 Measuring Crowded Trades The objective in this section is to identify loser stocks that are crowded by momentum traders and avoid them in the construction of the momentum strategy. Prediction 6 (Placebo Test) Momentum in futures market should su¤ er less from momentum crashes. I classify all loser stocks belonging to the top 20th percentile of SIRit 1 as the highly-shorted group. I show in Section 7. Loser stocks that are crowded by momentum traders have two characteristics: they are sold heavily by both short-sellers and also existing share holders. Starting with the baseline momentum strategy described in Section 2. However. and also from existing investors originally holding a long position. The reason for focusing only on the highly-shorted group is that a stock can have low short interest for two reasons. 3 Crowded Trades in Momentum 3. and market state dependency as is displayed in equities.

Therefore. 3. My de…nition of EXIT is similar to the one used by Hong and Jiang (2011).2 Hedging Market Exposure The stock selection method of momentum. excluding these potentially costly to short securities ensures that the portfolio constructed here can be implemented. on the other hand. EXIT. a univariate sort on SIR alone shows that loser stocks with low SIR su¤ers severely from momentum crashes. This is because investors who are already owning the stock are actively monitoring the stock. which relies on past returns ranking. This is because entries of institutions will contaminate my measure as explained in Hong and Jiang (2011). Non-crowded Losers Crowded Short Interest Ratio Exit by Institutions Figure 2: Splitting the losers into a crowded and non-crowded portfolio constraint. and that institutions with little holdings are unlikely to have major price impact. Henceforth. is unlikely to su¤er from the same problem. the momentum portfolio that buys the baseline winners and short the crowded losers will be referred as the “crowded portfolio”. Moreover. We should expect these stocks to be more prone to short-covering if they are di¢ cult to short. Besides. and Waldmann (1990). The EXIT measure only captures selling by institutions but ignore their entries. SIR alone does not contain enough information for us to identify crowded trades and to explain momentum crashes. high entries can be associated with more overcrowding due to the increased shorting pressure. The frenzies from the new investors or noise traders will induce more shorting pressure from the arbitrageurs. Thus. naturally induces large time-varying market exposures (Grundy and Martin (2001)). and similarly the momentum portfolio constructed by buying the baseline winners and shorting the non-crowded losers will be called the “non-crowded portfolio” throughout this paper. High levels of entry could be capturing an increased investor base as in Merton (1987) or increased attention from noise traders as in De Long. where they de…ned it as the fraction of institutions that have completely liquidated their positions the quarter prior. Expressing it in terms of shares is more suitable for our purpose since SIR is also measured in share terms. The dynamic exposure to market risks obscures the comparison of performance across the various strategies. Thus. Shleifer. Summers. I construct 8 .

t is h r~p. crowded. Unhedged Strategies 3 log10($ portfolio value) 0 1 −1 2 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 Non−crowded Losers Crowded Losers Baseline Figure 3: Log cumulative returns for unhedged strategies. The hedged portfolio is formed by purchasing ^ shares of the market portfolio.T r + ::: + i ~tm 10 10. and non-crowded momentum portfolio. I run a daily time-series regression of the form: i r~i.t 3. Speci…cally.T r + "i. and compares the portfolio performance and characteristics for the baseline.T h Speci…cally. denote r~p. the hedged excess return r~p.T + : : : + ^ 10.t ^ p.3 Portfolio Performance This section tests Prediction 1 and Prediction 2 .t and r~tm are the excess return for stock i and the market respectively at time t: The market beta of stock i is estimated by ^ ^i i + ^ 1. 9 . I estimate the market beta of individual stocks with daily return data over the past six months with ten lags of the market return and use the sum of their coe¢ cients as the estimate of market beta (Dimson (1979)).T r ~m.T + ~tm 0.T for portfolio p is then given by the value-weighted betas of indi- vidual stocks. At the end of month T 1 for each stock i. p.t = i.t to be the portfolio excess return for month t.t where r~i.t = r~p.T i i.T The ex-ante portfolio beta ^ p.T r + i ~tm 1 1.T 0.ex-ante market neutral portfolios that hedge the dynamic market exposure.

performance for all strategies improved including the baseline. and overweighs high beta stocks in the loser portfolio. This is due to the fact that none of these strategies are market neutral. While the drawdowns of the non-crowded portfolio are generally smaller after hedging. The market non-neutrality characteristics of these strategies lead to drawdowns when the market turnaround after sustained periods of price movement in the same direction. the non-crowded strategy still experiences moderate drawdowns. Figure 5 plots the subsample log cumulative returns for the hedged non-crowded and baseline 10 . the crowded strategy experiences signi…cantly larger drawdowns compared to the uncrowded and baseline strategies. As discussed in Grundy and Martin (2001) and Daniel and Moskowitz (2013). After hedging out market exposure. Therefore. This observation is con…rmed in Table 2 and Table 3 where the market beta for the unhedged strategies are generally signi…cantly negative. Similarly. the comparison of crashes between the crowded and non-crowded portfolios becomes more apparent. Hedged Strategies 3 log10($ portfolio value) 1 0 2 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 Non−crowded Losers Crowded Losers Baseline Figure 4: Log cumulative returns for hedged strategies. Figure 3 depicts the log cumulative return of a $1 dollar investment in Jan 1980 for the unhedged strategies. in bear markets when market has fallen signi…cant over the portfolio formation period. Although much of the crash is mitigated. momentum tends to overweigh on low beta stocks in the winner portfolio. it did not help at all during the 2009 crash and even displayed larger drawdown in 2000 for the baseline strategy. Figure 4 depicts the log cumulative return of the hedged strategies. it is likely that the winners have relatively low beta compared to that of losers. Consistent with Prediction 1. This con…rms Prediction 2 that time-varying market exposure is not the main driver for momentum crashes. Moreover. we can expect the opposite to happen in bull markets.

6 .4 Since it is misleading to compare drawdowns across strategies with substantially di¤erent expected returns. Given the popularity of momentum strategies among sophisticated investors and the rapid ‡ow of capital into hedge funds post 2001 (e. and quanti…es the performance di¤erential as seen earlier in the above cumulative return …gures.5 0 . The average drawdown is then the full sample average of D(T).. the widen performance di¤erential between the non-crowded portfolio with the baseline and crowded portfolio post 2001 is consistent with the crowded trade hypothesis. maxs2[T 36. and substantially outperformed the baseline post 2001 even before the crash in 2009.2 0 . Consistent with Prediction 1 and Prediction 2.g. The non-crowded portfolio has the lowest absolute drawdowns and o¤ers superior return-to-drawdown 4 Three year average drawdown is de…ned as follows: the month T drawdown is D(T ) = max[0.5 1 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 Jan 2000 − Sep 2012 Full Sample log10($ portfolio value) log10($ portfolio value) 3 −. Subsample Performance of Hedged Momentum Portfolios Jan 1981 − Dec 1989 Jan 1990 − Dec 1999 log10($ portfolio value) log10($ portfolio value) 1. the non-crowded portfolio displays superior performance with reduced skewness relative to the baseline and crowded portfolio.4 . I compute the return-to-drawdown ratio which is analogous to the Sharpe ratio that captures the risk- return trade-o¤ where risk is measured by average drawdown instead of standard deviation. strategies for each 10 year subperiods. Moreover.T ] V (T )=V (s) 1] where V (t) is the value of the portfolio at the end of month t. The non-crowded portfolio outperformed the baseline slightly before 2000.6 0 1 2 80 85 90 95 00 05 10 20 0 20 1 20 2 20 3 20 4 20 5 20 6 20 7 20 8 20 9 20 0 20 1 12 0 0 0 0 0 0 0 0 0 0 1 1 n n n n n n n 20 Ja Ja Ja Ja Ja Ja Ja Non−crowded Losers Baseline Figure 5: Cumulative log returns by subsample for hedged strategies. 11 .8 1 0 . Table 2 displays the portfolio statistics in the full sample for the various strategies.2 .2 . the crowded portfolio displays substantial negative skewness regardless of whether market exposure is hedged. I use a three year look-back window in computing the average drawdown measure. Wang and Zheng (2008)).4 .

DM …nd that ^ B. 3.trade-o¤s.U is signi…cantly positive when we regress with the loser portfolio return as dependent variable. IU is the contemporaneous up market indicator that is set to 1 when market return is positive in month t. Column (1) corresponds to the baseline momentum strategy and reconciles the …ndings of Daniel and Moskowitz (2013): the loser portfolio is e¤ectively a long call option on the market. and conclude that the conditionally high premium attached to the option- like payo¤s of the past-loser portfolio gives rise to momentum crashes. meaning that momentum is e¤ectively a short-call option on the market.U is positive for the baseline but should be insigni…cant for the non-crowded loser portfolio. DM also show that most of the optionality comes predominately from the loser portfolio. meaning that the estimated B. Table 3 repeats the analysis for the post 2001 subsample and shows consistent results. However.t are the excess return of the momentum strategy and market portfolio in month t: IB is an ex-ante bear market indicator that is set to 1 when the cumulative market return in the 24 months leading up to the start of month t is negative. The non-crowded momentum strategy continue to have modest return while the baseline and crowded portfolios earning nearly zero and even negative returns. I focus on the short-leg rather than the winner-minus-loser portfolio since the optionality of momentum comes predominantly from the losers (Daniel and Moskowitz (2013)). Sharpe ratios. the market beta in bear market with negative market return is ^ 0 + ^ B = 12 . Note that the performance di¤erential among the non-crowded. performing the analysis including the long-leg does not change the conclusion. Prediction 3 states that most of these premium should disappear in the non-crowded loser port- folio.t = [ R 0 + B IB ] + 0 + IB B + IU B. and return-to-drawdown ratio. This explains why momentum tends to crash when market rebounds in bear markets.t + "t R (3) ~ mom. crowded. Prediction 3 states that B.t + "t R (4) ~ p.U is signi…cantly negative.t = [ R 0 + B IB ] + 0 + IB B + IU B. Furthermore. The market beta in non-bear market is a signi…cant ^ 0 = 1:31. DM …nd that the momentum portfolio is e¤ectively a short call option on the market using the following market-timing regression of Henriksson and Merton (1981): ~ mom. I replace the dependent variable of Equation 3 and estimate the following speci…cation ~ p.t and R Here R ~ mkt.U ~ mkt.4 Optionality of Momentum Strategies Daniel and Moskowitz (2013) point out that momentum crashes occur during market recovery following bear markets.U ~ mkt. and also because all portfolios considered in this paper so far share the same winner portfolio. where R Table 4 presents the regression results for the full sample. I test Prediction 3 and ask whether the non-crowded losers experience any of the aforementioned premium.t is the excess return for the portfolio in consideration. and baseline portfolio is much starker.

U = 1:67 represents the optionality of the strategy.t SIRi.t 1!t CRi.t 1!t = SIRi. the optionality remains highly signi…cant even in the hedged baseline. This is consistent with Prediction 4 that there should be more short covering among the crowded losers 13 . the point estimate for the option coe¢ cient of the hedged non- crowded strategy is negative. 4 Short Covering in the Crowded Portfolio This section tests Prediction 4 by inferring the amount of short covering in loser stocks and com- paring the intensity of short covering in the crowded portfolio with the non-crowded portfolio. Indeed. I back out the number of shares covered by short sellers throughout month t. This data allows us to compute the total volume due to short sales SVi.t 1!t as the fraction of total shares outstanding covered by short sellers throughout month t : SVi. This is also another test of momentum crashes: removing the optionality is equivalent to removing the large drawdowns of momentum when the market recovers. This suggests that the embedded option in the past losers is not driven by the time-varying beta alone. The results are once again consistent with our crowded trade and short covering hypothesis. by exploiting the identity SIi. Column (2) corresponds to the baseline after hedging market exposure. the non-crowded loser portfolio shows insigni…cant optionality and is therefore insensitive to market rebound in bear markets. and de…ne the cover ratio CRi. and an F- test shows that it’s highly signi…cant at 1% level (last row). Together with monthly short interests SIi. which works in our favor if we were to short the portfolio.U = 2:99: The incremental beta ^ B + ^ B.t (5) I normalize Equation 5 by the number of shares outstanding. Column (3) to (4) present the results for the non-crowded losers. First inspection suggests that there are no noticeable di¤erences between the two series except for the spike in the cover ratio of the crowded losers in August 2009. Coveredi.t 1!t . Table 5 repeats the analysis with the post 2001 subsample. the market beta in bear market with positive market return is ^ 0 + ^ B + ^ B.t + (6) # shares outstanding Figure 6 plots the time-series of cross section median cover ratios for the non-crowded and crowded loser stocks.1:49. The data used here is the TAQ NYSE Short Sales data which identi…es at a transaction level which trades are short seller initiated for all NYSE stocks from January 2005 to September 2012.t 1!t = SIi. The market exposure is hedged as seen by the small and insigni…cant ^ 0 = 0:0373: Hedging out market exposure eliminates the time-varying beta loading e¤ect systematic to the momentum strategy.t which measures the number of uncovered shares sold short outstanding.t 1 + SVi. However. Whether hedged or unhedged.t 1!t throughout month t (from end of t 1 to month t) for stock i.t 1!t Coveredi. on which the crowded momentum portfolio has its worst return ( 131:76%) in our sample.

96% of 1 total shares outstanding more short covering compared with the rest of the losers. Median Cover Ratio 25 20 Cover Ratio (%) 10 5 0 15 05 06 07 08 09 10 11 12 20 20 20 20 20 20 20 20 Non−crowded Losers Crowded Losers Figure 6: Median fraction of total shares outstanding covered by short sellers in each month for the crowded and non-crowded portfolio. The estimated coe¢ cients for each month are then averaged to produced the …nal estimates. Crowdedit 1 = 1 if SIRit 1 and EXITit 1 belong to the top 20th percentile as described in Figure 2. t) 2 Losers where Crowdedit 1 is the indicator variable for stock i at time t belonging to the crowded loser group as described in Section 3.t 1!t = it + 1t Crowdedit 1 + c1t T urnoverit 1 + c2t rit 1!t + c3t rit 2!t 1 (7) +cBM t R 1BM R SIZE it 1 + ct 1SIZE it 1 + "it . 6 I use lagged turnover because short covering contributes to contemperaneous turnover. when momentum crashes. 14 .5 I control for lagged turnover6 . Column (1) of Table 6 presents the results for Equation 7. The estimated ^ suggests that we should expect 0. Column (2) uses the variations not only among the losers. Next I test Prediction 4 in the cross section using Fama and MacBeth (1973) regressions. every month I estimate the following using the Fama and MacBeth 5 In other words. 8 (i. The standard errors are Newey and West (1987) adjusted allowing for two lags. but rather the full sample and asks whether our portfolio sort as described in Figure 2 can predict more short covering in the subsequent month across the full cross section. contemporaneous and lagged monthly return. Speci…cally. Every month I estimate a cross section regression using the universe of loser stocks CRi. and a full set of decile dummy controls for book-to-market ratio (BMR) and size.1.

k 1M t.k = 1 M omentum ). short covering increases signi…cantly by 0. I also include a full set of decile dummy control for cumulative past returns (M OM ) : Column (2) of Table 6 shows that being highly shorted increases short covering signi…cantly by 0. I trace out the “event-time” path of short interest ratios for stocks falling into the lowest past 12 months cumulative return decile (losers). Being in the high exit group alone has no signi…cant impact on short covering. i.e.k and 1M t. 1Reversal t. Speci…cally.k omentum + k Loser B 1it. suggesting that non-loser stocks are also prone to overselling and crowded trades.(1973) procedure CRi. and otherwise in momentum state (i.. I estimate the following panel speci…cation with stock and time …xed e¤ects 12 X 12 X k Loser SIRit = i+ t+ G 1it. However. 15 .7 If a stock has a “spell”of consecutive months in the loser portfolio. the entrance Rt..k (9) k= 12 k= 12 size +c 1it + cIO size 1IO it +c BM R BM R 1it + cexchcd 1exchcd it 3m 30day +c1 T urnoverit + c2 V olit + "it The dummy variable 1Loser it.k 1Reversal t. This is consistent with the fact that short sellers have relatively short holding horizon.155% of total shares outstanding. and explores the path of short interest for loser stocks during periods when the momentum strategy does poorly.t 1!t = it + 1t HighSIRit 1 + 2t HighExitit 1 (8) + 3t (HighSIRit 1 HighExitit 1) + 4t (HiExitit 1 Loserit ) +c1t T urnoverit 1 + c2t rit 1!t + c3t rit 2!t 1 +cBM t R 1BM it 1 R + cSIZE t 1SIZE it 1 + cM t OM 1M it OM + "it where HighSIRit and HighExitit are indicator variables for stock i belonging in the high short interest ratio and exit group de…ned using the 20% cuto¤ respectively. the interaction term shows that when both SIR and EXIT are high. the above results con…rm Prediction 4.k omentum are analogous indicators for the “reversal” and “momentum” state.683% of total shares outstanding. Taken together. 1Reversal t.k is set to 1 when stock i is k months away from being included in the momentum portfolio. This methodology allows us to capture short covering at the strategy-level. and further supports my choice of SIR and EXIT as the identifying variables for crowded trades.k 7 The results presented here works for a variety of reasonable cuto¤ points.e. when the stock is more prone to overselling. A month is de…ned to be in reversal state if the baseline momentum return is less than -15% during that month. 5 Unwinding of Arbitrageurs Upon Su¤ering Losses This section tests Prediction 5 by adopting a simple extension of Hanson and Sunderam (2013).

and otherwise in “momen- tum” state. 644. and trailing 30 days volatility as additional controls. T = 390. 1it . 282. Hanson and Sunderam (2013) argue that the estimated ^ ki represents ‡ow of arbitrage capital into the momentum strategy on average. and 1it ownership. Nobs = 1. A month is in “reversal”if the baseline momentum return is less than -15%. Thus. I also include exchange …xed e¤ects (1exchcd it ). 16 . In both states. This …gure plots the “event-time” path of SR for stocks entering the momentum loser decile. three month turnover.5 0 −10 −5 0 5 10 Event Time. The 95% con…dence bands are plotted around the estimates using standard errors clustered both at the stock and month level as done by (Thompson (2011)). and book-to-market ratio. institutional it .8 1. 1size IO BM R are full sets of decile dummy controls for size.5 Abnormal Short Interest Ratio (%) Enter Loser Decile 1 Exit Loser Decile . we can interpret the …gure as the event-time path of arbitrage capital ‡ow into the momentum strategies prior and post portfolio formation. Hanson and Sunderam (2013). I include both the reversal and momentum dummies for ease of presentation and interpretation of the coe¢ cients. short interest gradually builds up over months before the stock enters the loser 8 These are standard known determinants of short ratios.and exit dummies will be measured using the …rst and last month of the “spell” respectively. RN F E = 37%. Regression coe¢ cients ^ kG and ^ kB esti- mated from Equation 9 are plotted against k for the momentum and reversal state respectively. I draw 95% con…dence bands around these estimates using standard errors clustering by both stock and month as done by Thompson (2011). Months Reversal Momentum Figure 7: Event time path of short interest for losers. see D’Avolio (2002). 784. Figure 7 traces out the “event-time” path of short interest ratios for stocks entering the loser portfolio by plotting ^ kG and ^ kB against k. Nstocks = 2 14.

decile and sharply closes out as the stock exits the loser decile. The di¤erence of decline in IO between momentum and reversal states of 1. An F-test shows that the di¤erence is a highly signi…cant 35bps with an F-stat of 10. Jegadeesh and Titman (1993)). This di¤erence is also highly economically signi…cant given that the peak abnormal SIR for the momentum state is only 42bps. To summarize.62). Throughout the twelve months prior to entering the loser decile.1 Are Institutions Selling Losers? To validate our EXIT measure.k omentum + k Loser B 1it.9 Prior to entering the loser decile (before time 0).98. more capital is devoted to momentum strategy prior to its failure is consistent with Prediction 1 that the strategy is likely crowded prior to its failure. 5. However.k 1Reversal t. the decline in IO during reversals are 67% higher than that in momentum states. during reversal times. Moreover. I show that the decline in institutional ownership (IO) over the same period is 67% higher in reversal states. Hence. To formally illustrate this point.94% is economically and statistically signi…cant (F-stat=7. the gradual build up of the SR can be explained by arbitrageurs playing momentum over di¤erent horizons. the demand for shorting losers is higher and short-covering is more severe coming out of the loser portfolio. we need to con…rm that there is indeed more selling from insti- tutions prior to momentum crashes. 17 . Taken together.k (11) k= 12 k= 12 +csize 1it + cBM R size 1BM it R + cexchcd 1exchcd it 3m 30day +c1 T urnoverit + c2 V olit + "it Figure 8 depicts the event-time path of IO for loser stocks entering into the lowest momentum decile. …rst I de…ne Institutional Ownership (IO) as # shares held by institutional investors Institutional Ownership IO = (10) # shares outstanding I then estimate a panel speci…cation with stock and time …xed e¤ects: 12 X 12 X k Loser IOit = i + t + G 1it. losers have a change in 0 12 IO ^i ^i of 2:90% and 4:84% for the momentum and reversal state respectively. Thus there is more capital devoted to momentum prior to the reversal state. the decline in SIR when the stock exits the loser decile is sharper for reversal states than for momentum states.. There is substantial selling of the loser stocks from institutional investors prior to the 9 Since momentum works over shorter horizon (e. it con…rms Prediction 5 that arbitrageurs do unwind from momentum upon su¤ering losses in the reversal state which causes loser stocks to su¤er more from short covering when momentum fails. abnormal short interest is higher in reversal states than in momentum states consistently by about 50bps.k 1M t. Using the same framework as above.g.

A month is in “reversal” if the baseline momentum return is less than -15%. 436. Nstocks = 15. Regression coe¢ cients ^k and ^k estimated from Equation 11 are plotted against k for the momentum and rever- G B sal state respectively. and otherwise in “momentum” state. 494. 6 Abnormal Institutional Ownership (%) −2 0 2 4 Exit Loser Decile Enter Loser Decile −4 −10 −5 0 5 10 Event Time. 18 . Restricting the estimation to a common sample gives almost identical results. Months Reversal Momentum Figure 8: Event time path of institutional ownership for losers. The number of observations di¤ers from Figure 7 due to missing short interest data for some stocks. I draw 95% con…dence bands around these esti- mates using standard errors clustering by both stock and month as done by Thompson (2011). T = 390. This …gure plots the “event-time” path of IO for stocks entering the momentum loser decile. RN F E = 23%. 344. 2 Nobs = 1.

I analyze a set of 28 commodity futures. Figure 9(a) and Figure 9(b) plot the log cumulative returns for the unhedged and hedged strategies respectively. and the embedded optionality in U.failure of momentum. I report the results for all asset classes. Since there are very few commodities traded early in the sample. volatility and Sharpe ratios.t be the cumulative t 2 to t 12 returns for futures contract i: I assign weights P i rank (Ri. 10 currency futures. the commodities only strategy. The use of this weighting scheme is because doing a decile sort will leave too small of a cross-section. a market neutral momen- tum strategy in futures market should not be prone to crashes according to our initial hypothesis regarding crowded trades and limits of arbitrage in shorting. skewness. with the sharpest decrease in SIR being the momentum crashing month.t = ct rank (Ri.t ) N where ct is chosen such that the portfolio is dollar-neutral. and the non-commodity strategy. bonds. and the market portfolio is de…ned as the equal-weighted portfolio within the respective group. The return-to-drawdown ratio in futures is 50% higher than that in equities. and overcrowding momentum together with high in‡ow of short selling capital leading to the failure of momentum. (2013) in constructing the futures momentum strategy.88. 19 . 6 bond futures. a total of 63 futures contracts obtained from Bloomberg. In fact. The full sample period used for the futures market is January 1981 to June 2013. the drawdowns are presumably due to the ine¤ectiveness of cross-section momentum investing with 10 I test this by adding additional event-dummy variables which corresponds to the worst-upward-movement during the continuous loser spell interacted with 1Reversal t and 1M t omentum into Equation 9 and Equation 11. currencies. since there is no asymmetry between buying and shorting in futures market.27 compared to the hedged baseline in equity of negative -0. However. This section test Prediction 6 using a set of 63 futures contracts in commodities. Constructing the portfolio using quintile and tercile sorts produce qualitatively identical results. and 19 index futures. drawdowns. This suggests that institutions trade in a momentum fashion at least within the losers. Let Ri. overall there are no crashes and the magnitude of the drawdowns are much smaller compared with equities. However. I follow Asness et al. the hedged futures strategy has a signi…cantly better skewness of positive 1. Table 7 presents the performance statistics of momentum in futures markets. and indices. Table 12 summarizes the futures contracts used in di¤erent markets. Futures momen- tum displays comparable (if not better) average return. there is substantial decrease in IO just prior to momentum crashes.S. Due to the small number of contracts in the non-commodity markets.10 6 Momentum in Futures Market Hedging the time-varying market exposures is not su¢ cient in eliminating momentum crashes. Although there are some down-runs early in the sample in the commodity strategy. in unreported analysis. equity momentum.t ) wi.

5 0 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 All Futures Commodities Only Non−Commodities (b) Hedged Futures Momentum Figure 9: Cumulative log returns for momentum portfolios in futures markets.2. Figure (a) and (b) correspond to the unhedged and hedged strategy respectively. Cumulative Returns − Unhedged Futures 1. currency. 20 .5 log10($ value) 1 . bond. Hedged strategies refer to the elimination of market exposure due to holdings as described in Section 3. The “All Futures” strategy is formed by including comodity.5 1 log10($ value) .5 0 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 (a) Unhedged Futures Momentum Cumulative Returns − Hedged Futures 2 1. and index futures. “Commodity” strat- egy includes commodity futures only. and “Non-commodity” includes all futures contracts except commodities.

6. NYSE published a book in 1951 with monthly short interest data starting May 1931 for 24 selected stocks. Consistent with the crowded trade hypothesis. (4).U + ^ B : The unhedged “All Futures”strategy’s beta is ^ + ^ = 1:92 lower during rebound months in bear markets. we see that the prices of loser stocks were likely below fundamental and thus reverts back subsequently towards the end of 1933. The magnitude displayed B. and crash problems as in equities is consistent with my hypothesis that these problems are a by-product more limits of arbitrage in shorting. Table 8 tests whether the various momentum strategies in futures market has signi…cant optionality embedded. the path of short interest 21 .U and ^ B. My results here conformed with Daniel and Moskowitz (2013). Among the 24 selected stocks. The red vertical line is the date at which the momentum crash occurred. column (2).2. Table 9 repeats the analysis in the post 2001 subsample and gives qualitatively identical results. I use daily data in the past 6 months to estimate the market beta of the portfolio and to construct the hedging portfolio as described in Section 3. This data allows us to examine path of short interests of loser stocks during the momentum crash in 1932. and (6) show that none of the futures momentum strategies display any signi…cant optionality once the time-varying market exposure due to portfolio holdings is ac- counted for. drawdown. However.U B here for momentum in futures market is comparable to that of equities. However. (5) represent the strategies not accounting for time-varying market exposure due to change in holdings. This suggests that the optionality displayed in futures momentum is driven solely by the portfolio weights tilting towards low (high) beta contracts in the long (short) leg during bear markets. (3). 10 of them belonged to the bottom 30% of the past year cumulative return distribution (losers). Once we expand the sample by including all futures contract in the early sample.4 in futures markets.a small cross-section due to imperfect diversi…cation. All three strategies display both economically and statistically signi…cant negative coe¢ cient in ^ B. 7 Extensions 7. This section performs similar analysis as Section 3. My …ndings are once again supportive of my hypothesis that the optionality of momentum is driven by more limits of arbitrage in the short-leg.1 Optionality of Momentum Portfolios in Futures Markets We should expect that any optionality embedded in momentum portfolio formed in futures markets be eliminated after time-varying market exposure is correctly accounted for. Column (1). Figure 10 plots the average short interests ratio together with the total value of the loser portfolio. the drawdowns no longer exist. The fact that momentum strategies in futures market do not su¤er the same skewness.1 Momentum Crashes of Loser Stocks in 1932 The sample period of the main analysis done in this paper starts from January 1980 as it’s the …rst available date for the Thompson Reuters Institution 13F holdings.

the crowded winner portfolio is essentially long a put option on 22 . Short sellers have covered a majority of their positions before the rebound occurred. hedged non-crowded winners. We can de…ne a notion of “crowded winners” in an analogous way as in Section 3. Figure 11 visualizes the construction of the crowded and non-crowded winner portfolio.6 4 0. I formally test the optionality in bull market for the winner portfolios.2 Crowded Trades in the Winners Portfolio This paper has focused on identifying crowded trades in the loser portfolio. 7.2 10 1 8 0. Note also that the crowded strategy seems to be sensitive to market state in the opposite fashion com- pared with the losers: the crowded winners portfolio crashes when market retreats in bull market. This is consistent with the general belief that short sellers were informed back in the 1930s since only very sophisticated investors establish short positions. EN T RY here is along the same line as before: in‡ows of institutions contaminate our measure in the face of investor inattention or noise traders (Hong and Jiang (2011)). and short sellers were covering their positions as price starts to fall. Table 10 presents the regressions analogous to what is done in Section 3.4 2 0.6 12 1. Consistent with the crowded trade hypothesis. does not su¤er from these problems. and I will again use 20th percentile breakpoints. consistent with the rise of hedge funds likely overcrowding momentum.4 on the winner portfolios.4 Short Interest Ratio (%) 1. Figure 12 plots the cumulative log returns of hedged crowded winners.2 0 0 Aug-30 Mar-31 Oct-31 Apr-32 Nov-32 May-33 Dec-33 Jun-34 SR Loser Mkt Value Figure 10: Average Short Interest Ratio of Selected Loser Stocks in 1932 ratio is quite di¤erent from what is documented with the post 1980 data.1. and the market portfolio. on the other hand. The non-crowded portfolio. 14 1. The post 2001 performance of the crowded winners strategy is trending downwards. Short interests were highest at the peak of the loser portfolio value in May 1931. The rationale for using EXIT rather. say.8 6 0. First. the crowded strategy is more volatile and experiences larger drawdowns and crashes.

2 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 Non−crowded Winners Crowded Winners Market Figure 12: Log cumulative returns to winners portfolio –Hedged.2 .8 . Short Interest Ratio Crowded Non-crowded Winners Exit by Institutions Figure 11: Splitting the winners into a crowded and non-crowded portfolio .4 .6 log10($ portfolio value) .2 0 0 −.6 . 23 .4 lcummkt .8 1 .

SSRN Working Paper . Daniel. 24 . This is consistent with our hypothesis that the optionality comes from the interaction of crowded trades and the di¢ culty of shorting. Pedersen (2013).. currencies. The market for borrowing stock. Daniel. Barroso. the baseline winner portfolio does not display signi…cant optionality. Jagannathan. (2002). Moskowitz (2013). Value and momentum everywhere. D’Avolio. Table 11 repeats the analysis using the post 2001 subsample. G. Since the construction of the winners portfolio does not involve shorting. and T. Re…ning mo- mentum to the non-crowded losers improves the performance of momentum signi…cantly. Tail risk in momentum strategy returns. Finally. and P. Moskowitz. bonds. K. there is considerable short-covering in the crowded losers especially during times when momentum crashes. Momentum crashes. J. T. Moreover. References Asness. with improved return-to-drawdown trade-o¤s and smaller negative skewness. K. P. C. placebo tests using a set of 63 futures contracts in commodities. Momentum has its moments. However. 271–306. H. Journal of Financial Economics 66 (2). 929–985. it is harder to detect such optionality.D from a bull market. I show that arbitrageurs unwinds from the momentum strategy upon su¤ering losses when momentum fails. contrary to previous analysis. 8 Conclusion I show that momentum crashes are due to overcrowding of momentum together with more limits of arbitrage on the short-leg of the strategy.the market during bull markets: both the hedged and unhedged crowded winner portfolio displays signi…cant positive estimates of ^ . The non-crowded portfolios again do not su¤er from the same problem whether hedged or unhedged. and in- dices support my hypothesis that impediments in shorting are important in explaining momentum crashes. D. The loser portfolio is classi…ed into a crowded and non-crowded loser portfolio based on institutional exit rates and short interest ratio. Santa-Clara (2013). The Journal of Finance 68 (3). meaning that the loser stocks will fall when the market retreats L. and L. Kim (2012). Working Paper . eliminates momentum crashes. R. Working Paper . S. The embedded optionality in the loser portfolio as documented by Daniel and Moskowitz (2013) is explained by a crowded trade and short covering mechanism. and the optionality is eliminated once the momentum strategy is re…ned to the non-crowded losers.. but the signs of the crowded portfolios are consistent with the presence of optionality that is adverse to the performance of the momentum strategy. None of the winner portfolios displays signi…cant optionality. and S.

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52 0.31% 22.66% 28.51% -35.56% 44. The return-to-drawdown ratio is the ratio between annualized excess portfolio return and three year average drawdown.67 1. and FF3-Alphas are annualized.43% 26.89 Return-to-Drawdown Ratio 0.95% 29.88 Three Year Avg Drawdown 18.51% 38.72 5. The minimum and maximum returns are one month return and are not annualized. FF-3 Alphas and Market Betas are calculated using the Fama and French (1993) three factor model estimated with monthly data.63% 16.86% -131.01 0.70% 25.62% 42.15% 24.11 -3.22% Skewness -1.98% 27.43 4. Table 2: Strategy Statistics –Full Sample Baseline Baseline Hedged Crowded Crowded Non-crowded Non-crowded Hedged Hedged Mean 12.36% -138.02 -0.02 39.51 5.08% 22.01% 25.81 1.62% 27.91 40.60 -0.79% t-stat FF3-Alpha 4.25 Market Beta -0.95% 15.81 -3. standard deviations.71 -0.38% 22.61 -0.23% 17.37% 18.64 -0.77% 28 Max 25.13 7.33 Notes: The sample period is Jan 1981 to Sep 2012.27 Min -45. The t-stats are estimated using OLS with Newey and West (1987) standard errors with two lags.10 4.83% Std.06 -0.1.17% 16.91 -0.76% -41.48 0. Dev.37 0.72 0.34% 13.66% 29.58% -29.55 0.62 Kurtosis 11.73 5.48 -3.45% 25.54% 30.42 0.01% Sharpe Ratio 0.93% FF3-Alpha 18. Sharpe ratios. 26.47 -0.06% 32. Means.13 1. Three year average drawdown is de…ned as follows: the month T drawdown is D(T ) = max[0. maxs2[T 36.16 t-stat Beta -3.10 -0.28 1. The average drawdown is then the full sample average of D(T).72 0.31 4.T ] V (T )=V (s) 1] where V (t) is the value of the portfolio at the end of month t.88 -3.98 6. .32% 28. The de…nitions for the di¤erent strategies are described in Section 3.

.67 5.54% 24.27% 14.51% -35.96 Notes: This is a replication of Table 2 with subsample from Jan 2001 to Sep 2012.17 33.03 0.12% 34.07% -1.42% Std.22 0.59% Sharpe Ratio 0.60 0. The return-to-drawdown ratio is the ratio between annualized excess portfolio return and three year average drawdown. The t-stats are estimated using OLS with Newey and West (1987) standard errors with two lags.25% 25.50% 40. standard deviations.84 -0.94% 52.86% -131. Three year average drawdown is de…ned as follows: the month T drawdown is D(T ) = max[0.89% 18.56 42. maxs2[T 36.88% -1. Sharpe ratios.17 t-stat Beta -4.36% -138. FF-3 Alphas and Market Betas are calculated using the Fama and French (1993) three factor model estimated with monthly data.47 Return-to-Drawdown Ratio 0.99 -0.40% 31.26 0.82% 15.97 2.04 -0.49% 26.76% -41.07 -0.29% 58.06% 53.87% 26.67 -0.08 -0.66% 28. 34.05% 45.03 0.32% 28.24 -1.57% Skewness -1.80 Kurtosis 8.16 -0.75% 32. The de…nitions for the di¤erent strategies are described in Section 3.23 Market Beta -1.42% 19.55 8.1.02 0.T ] V (T )=V (s) 1] where V (t) is the value of the portfolio at the end of month t.31 0. Table 3: Strategy Statistics –Post 2001 Baseline Baseline Hedged Crowded Crowded Non-crowded Non-crowded Hedged Hedged Mean 1. The average drawdown is then the full sample average of D(T). Means.15 5.04 -0.43 0.11 Min -45.03 -0.06% 1.03 0.93% FF3-Alpha 2.19 -1.17% 8.58% -29.47% 1.80 -3.43% 32.77 -1.74 1.37 0.70% 8.03% t-stat FF3-Alpha 0. Dev.03 -0.19 -4.77% 29 Max 20.63 Three Year Avg Drawdown 36. and FF3-Alphas are annualized.92 0.33 -4.30 -3. The minimum and maximum returns are one month return and are not annualized.

0158*** (-1.181 -0.00456 0.U (2.982) (-0.296 0.0345 B (0.00684 0.491) ^ 0. .218** 1.0603 0.202) (-4.295) (1. IB is an ex-ante bear market indicator that is set to 1 when the cumulative market return in the 24 months leading up to the start of the month t is negative. The t-statistics (shown in parenthesis) are adjusted using the Newey and West (1987) estimator with 2 lags.309*** -0.867 This table presents the results of OLS estimates of ~ p. The p-value comes from an F-test of the null hypothesis that ^ B + ^ B.00380 -0.016 -0.396) (0.0528 0.470) (-1.173) ^0 -0.973) (1.076) 30 R-squared 0.030) ^ 1.00492** -0. IU is the contemperaneous up market indicator that is set to 1 when the market return is positive in month t.28) (-0. Table 4: Loser Portfolio Optionality Regressions –Full Sample (1) (2) (3) (4) Baseline Baseline Hedged Non-crowded Non-crowded Hedged ^B -0.t + et with the dependent variable being the return of the baseline and non-crowded loser portfolios. *.U )]Rmkt.362) (0. Monthly regression from Jan 1980 to Sep 2012.183 -0.136) (-0.0635 0 (16.0306 0.191) (-0.0124*** -0.92) (-0. t-statistics are shown in parentheses.0198 (-1. and *** means that the point estimate is statistically di¤erent from zero at 10%.165 0.109 B.972) (-3.t = [ R 0 + B IB ] +[ 0 + IB ( B + IU ~ B.U p-value 0.U = 0.0176 -0.670 0.516 0.0132 -0.922 1.0745 B B.488** 1.817) (-1.091) (1.681 0. **.473*** -0. 5% and 1% level of signi…cance.103) ^ 1.00895 ^ +^ 1.0373 1.551) (13.

t + et with the dependent variable being the return of the baseline and non-crowded loser portfolios.188 1.908*** 0. IU is the contemperaneous up market indicator that is set to 1 when the market return is positive in month t.0141 -2.00406 -0.178) (-0.016 -0.0160 ^ +^ 1.U = 0.284 -0. .0930 B (-1.171) ^0 -0.488** 1.082) ^ 1. Monthly regression from Jan 2001 to Sep 2012.0150 -0.776*** 0.00637 -0.0193** -0.970) (-9.0640 0 (11.t = [ R 0 + B IB ] +[ 0 + IB ( B + IU ~ B.312) 31 R-squared 0.697 0. t-statistics are shown in parentheses.950) (1.509) (-0.251) (-0.209) (5.746 -0.573) (0.521** -0.U )]Rmkt.42e-06 0. *.228) ^ 1. The p-value comes from an F-test of the null hypothesis that ^ B + ^ B.40) (1.218* 1.75e-05) (1. IB is an ex-ante bear market indicator that is set to 1 when the cumulative market return in the 24 months leading up to the start of the month t is negative.U (2.0182** (-1. and *** means that the point estimate is statistically di¤erent from zero at 10%.203 0.728) (-2. 5% and 1% level of signi…cance.0488 0.030) (-0.0222 (-0.109 B.570 0.251 0.921) (-0.732 0.258) ^ -0.0941 0. Table 5: Loser Portfolio Optionality Regressions –Post 2001 (1) (2) (3) (4) Baseline Baseline Hedged Non-crowded Non-crowded Hedged ^B -0.066) (-2.683 This table presents the results of OLS estimates of ~ p.202 B B.067) (1. The t-statistics (shown in parenthesis) are adjusted using the Newey and West (1987) estimator with 2 lags. **. The results for the full sample regressions is in Table 4.381) (-2.177 0.U p-value 0.270 -0.

246) High Short Interest Ratio[t-1] 0.155*** (4.0219 (-0.683*** (12. t-statistics are shown in parentheses.183) Size Decile Control Yes Yes Book-to-Market Ratio Decile Control Yes Yes Momentum Decile Control No Yes Losers Only Subsample Yes No Observations 5.726 0.634 Number of Months 93 93 Note: Fama and MacBeth (1973) estimation with Newey and West (1987) adjusted standard errors allowing for 2 lags. Table 6: Cover Ratio Fama-Macbeth Regressions (1) (2) Cover Ratio Cover Ratio Crowded Losers[t-1] 0. *. 32 . 5% and 1% level of signi…cance.859 97.279 Average R2 0. **.94) High Exit[t-1] -0. and *** means that the point estimate is statistically di¤erent from zero at 10%.464) (-0.0903 -0.206 (0.961** (2.617) Constant 0.825) High SIR x High Exit[t-1] 0.

10% Std.55 Return-to-Drawdown Ratio 0.07 0.56 3.62% -10.95 1. The minimum and maximum returns are one month returns and are not annualized.23% 18.36% 7.29 Three Year Avg Drawdown 9.64% 27.84% -12.55 0.07 0.55 Return-to-Drawdown Ratio 1.56 3.86% -17. Means. “Commodity” strategy includes commodity futures only.96% 16.97 1.20% 17.51 0.06% Skewness 0.58% 18. 14. currency. Market risk is hedged as described in Section 3.27% 13.40% 12. .64 3.76% 17.42% 9.85 3.54% Sharpe Ratio 0.27 -0. and index futures.63 0.48% 8.00% 12.29% 20.23% Notes: The “All Futures” strategy is formed by including comodity.2.95% 9.19 0.76% 17.27 -0. bond.29% 20.23% Panel B: Post 2001 No Hedging Hedged Market Risk 33 All Futures Commodity Non-commodity All Futures Commodity Non-commodity Mean 5.09 Min -15.75% 7. with market index constructed as an equal-weighted portfolio within the group.63 0.T ] V (T )=V (s) 1] where V (t) is the value of the portfolio at the end of month t.61% Max 37. Three year average drawdown is de…ned as follows: the month T drawdown is D(T ) = max[0.75% 7.97 1.09 Min -12.72 0.19 0.68% 5.54% Sharpe Ratio 0.12 0.56 0.62% -10.79 Kurtosis 9.25% 6.64% 27. The return-to-drawdown ratio is the ratio between annualized excess portfolio return and three year average drawdown.29 Three Year Avg Drawdown 6.96% 16.60% 9.81 9.63 1.81% 18.78% -14.21 1.00% 12.45 3.30 0. Dev.81 9.57 6.36% 7.40% 12. Table 7: Mometum in Futues Markets –Strategy Statistics Panel A: Full Sample (Jan 1981 – June 2013) No Hedging Hedged Market Risk All Futures Commodity Non-commodity All Futures Commodity Non-commodity Mean 10.51 0. The average drawdown is then the full sample average of D(T).60% 9.77% -12.72% 8.56 0.84% -12.06% 15.13% -14.09 0.86% -17.77% -12.48% 8.25% 6.27% 13.72 0.65% 18.63 1.10% Std.82 0.06% Skewness 0.64 3.13% 19. standard deviations.61% Max 13. and sharpe ratios are annualized.39 0.06% 15. and “Non-commodity” includes all futures contracts except commodities. maxs2[T 36.95 1.72% 8.57 6.88 0.13% 19.30 0.79 Kurtosis 3.21 1. 19.53% 5. Dev.20% 17.

0118*** 0.158 -0.430) ^ -1.006) 34 R-squared 0. **.878) (-2.792) (-0.488 -1.0925 0.305) (3.0312 -1.243*** -1.U (-2.596) (1.414) (-0.134) (-0.454*** -0.919 0.0561 0. and *** means that the point estimate is statistically di¤erent from zero at 10%.0265*** 0. The t-statistics (shown in parenthesis) are adjusted using the Newey and West (1987) estimator with 2 lags.0207** 0. bond. “Commodity” strategy includes commodity futures only.426) ^ 0.0138 (2.0566 0 (2.985) (-0.114 0.0844 -1. *.172) (2.667) (0.00996 0.505) (1.665 B. and “Non-commodity” includes all futures contracts except commodities.539** 0.198** B (-0.533 B B.445) (0.000309 0.U )]Rmkt.642*** -0. IB is an ex-ante bear market indicator that is set to 1 when the cumulative market return in the 24 months leading up to the start of the month t is negative.774) (0.938) (2.195) (2.235 This table presents the results of OLS estimates of ~ p.t = [ R 0 + B IB ] + [ + IB ( B + IU ~ B. Monthly regression from Jan 1980 to Sep 2012.0192 0. 5% and 1% level of signi…cance.364) (2.0108 0. The “All Futures” strategy is formed by including comodity.135) (1.633) (-0.00907** 0.403 -0. .206 0.712*** -0.433) (3.0874 ^ +^ -1.U = 0.291** -0.187 0.641 0.947 < 0:001 0.301) (2.610 -1. The p-value comes from an F-test of the null hypothesis that ^ B + ^ B.0991) (0.002) (-0.483 -0.319) ^ -0.0725 0.710) (-2.0133 0.U p-value < 0:001 0.0124*** 0.00252 (2. and index futures. IU is the contemperaneous up market indicator that is set to 1 when the market return is positive in month t. currency.t + et with the dependent variable being the return of the momentum portfolio formed in futures markets.059) (1.427*** -0.00824** 0.920) (-2. Market index is de…ned as the equal-weighted portfolio within the respective group.0658 0. t-statistics are shown in parentheses. Table 8: Futures Momentum Optionality Regressions –Full Sample (1) (2) (3) (4) (5) (6) All Futures All Futures Commodity Commodity Non-commodity Non-commodity Hedged Hedged Hedged ^B 0.200) (-3.992) ^0 0.309 -0.0225*** 0.0390 0.

0197* 0. Table 9: Futures Momentum Optionality Regressions –Post 2001 (1) (2) (3) (4) (5) (6) All Futures All Futures Commodity Commodity Non-commodity Non-commodity Hedged Hedged Hedged ^B 0.0632 -0. t-statistics are shown in parentheses.164 0.500 -0.0307*** 0.477) ^0 0. IB is an ex-ante bear market indicator that is set to 1 when the cumulative market return in the 24 months leading up to the start of the month t is negative.156* 0.573) (-0. *.349 B.464 0. and index futures. The “All Futures” strategy is formed by including comodity.0111 (2.710) (2.991** -0.412*** -0.989) (0.335 -0. IU is the contemperaneous up market indicator that is set to 1 when the market return is positive in month t.0122** 0.167 0.954) (-2. bond.954) ^ 0. .t = [ R 0 + B IB ] + [ + IB ( B + IU ~ B.105 1.958*** -0.573 B B.424) (1.536 0.00137 0. “Commodity” strategy includes commodity futures only.852) (0.365 -1.119) (-0.U = 0. **.490) (-1. currency.149 0.749) (0.722** -0.188) (-0.0146 0.405) (1.617 0.057) (3. 5% and 1% level of signi…cance. Market index is de…ned as the equal-weighted portfolio within the respective group.241 0.656) (1.734** 0.361 0 (2.U p-value < 0:001 0.00333 0.393 -1.00599 0.140) (0.922 B (0.00284 0. Monthly regression from Jan 2001 to June 2013. The results for the full sample regressions is in Table 8.811) (-0.0317*** 0.502 < 0:001 0.091) (2.t + et with the dependent variable being the return of the momentum portfolio formed in futures markets.625) ^ -1. and “Non-commodity” includes all futures contracts except commodities.909) (1.929) (-3.00425 (0.135 -0. and *** means that the point estimate is statistically di¤erent from zero at 10%.279) (-1.229 ^ +^ -1.0214 0.764 -1. The p-value comes from an F-test of the null hypothesis that ^ B + ^ B.334*** -0. The t-statistics (shown in parenthesis) are adjusted using the Newey and West (1987) estimator with 2 lags.527 -0.945) 35 R-squared 0.361 This table presents the results of OLS estimates of ~ p.855) (1.242) (-2.023) ^ 0.807) (0.692) (0.0335 0.U (-2.U )]Rmkt.623* 0.132 0.346) (0.0108** 0.166) (1.

000953 L (2.445 0.240) (-0. IL is an ex-ante bull market indicator that is set to 1 when the cumulative market return in the 24 months leading up to the start of the month t is positive.D p-value 0.218 0.146 0.850*** -0.0129 0.0170) ^ 0.343) (0.596 0.0100 ^ +^ 0.807*** -0.246) (0. and non-crowded winner portfolios. Table 10: Winner Portfolio Optionality Regressions –Full Sample (1) (2) (3) (4) (5) (6) Baseline Baseline Hedged Crowded Non-crowded Crowded Hedged Non-crowded Hedged ^L 0.00429 (0.563) (4.D (0.746) (1. .161) R-squared 0.317 0.138 0.980) (-1.00434 0.209) (0.0111** 36 (0.438** 0.185 0. The t-statistics (shown in parenthesis) are adjusted using the Newey and West (1987) estimator with 2 lags.403 This table presents the results of OLS estimates of ~ p.484 0.772) (0.138 L.540) (2. **. 5% and 1% level of signi…cance. The p-value comes from an F-test of the null hypothesis that ^ L + ^ L.969) (-0. crowded.00763 -0.0371 0.733 0. t-statistics are shown in parentheses.00668) ^ 0.585 0.00537 0.D )]Rmkt.00862 -0.t + et with the dependent variable being the return of the baseline.653*** 0.373) (0.0105 0.629) (0.0697 0.173 -0.000751 0.191* -0.093) (1.00154 0 (8.00214 0.784) (7. ID is the contemperaneous down market indicator that is set to 1 when the market return is negative in month t.00109 0.00479 0.515** 0.00111 0. and *** means that the point estimate is statistically di¤erent from zero at 10%.139 L L.391 0.000812 0.752) (-0. Monthly regression from Jan 1980 to Sep 2012.00252 0.654) (0.664) ^ 0.688) (-0.922) (1.0159 0.373) (2.226) (0.511) (0.126 0.685) (-0.377*** 0.107 0. *.t = [ R 0 + L IL ] +[ 0 + IL ( L + ID ~ L.0146 0.0123** 0.482) (2.631) ^0 0.0958) (2.00496 0.D = 0.399) (0.

00591 0.531) (0.446) (-0.0856 0.275 0. The results for the full sample regressions is in Table 10.00309 -0.123 -0.701 0.0111** (0.827 0. ID is the contemperaneous down market indicator that is set to 1 when the market return is negative in month t.195) (0.850*** -0.0128 (-0.0886) (0.283) (-0. **.281 0.302 0.326 -0.652 0.t = [ R 0 + L IL ] +[ 0 + IL ( L + ID ~ L. IL is an ex-ante bull market indicator that is set to 1 when the cumulative market return in the 24 months leading up to the start of the month t is positive. The p-value comes from an F-test of the null hypothesis that ^ L + ^ L. Monthly regression from Jan 2001 to Sep 2012.622) (0.00537 0.D p-value 0.557) (4.428 0.858) (0.498) ^ 0.155 L.255) (-1.136) 37 R-squared 0.391* -0.533) (2. and *** means that the point estimate is statistically di¤erent from zero at 10%. Table 11: Winner Portfolio Optionality Regressions –Post 2001 (1) (2) (3) (4) (5) (6) Baseline Baseline Hedged Crowded Non-crowded Crowded Hedged Non-crowded Hedged ^L -0.729) (7.243) (0.000812 0.405* 0.867) (-0.477) (2.370 0.724) (-0.D )]Rmkt.141 -0.0123** 0.132 L L.00358 -0.670 This table presents the results of OLS estimates of ~ p.574 0.333 0.0585 -0.00154 0 (8.177) (-0. .191* -0.0669 0.0237 L (1.00496 0.00252 0.185 0. and non-crowded winner portfolios.283 -0.127) (-0.0168) ^ 0.889) (-1. The t-statistics (shown in parenthesis) are adjusted using the Newey and West (1987) estimator with 2 lags.00546 -0. *.0223 ^ +^ 0.0129 -0.t + et with the dependent variable being the return of the baseline.807*** -0.D (-0.244 0.0371 0.316) (0.669) (-0.370) ^0 0.0187 0.408) (-0.108) ^ -0. 5% and 1% level of signi…cance.775) (1.404) (-1.653*** 0.110 0.00129 -0.233) (0. crowded. t-statistics are shown in parentheses.0303 0.D = 0.571) (-0.

No. 2Yr CBT Jun 1990 Bond US Treasury Note. WTI NYMEX Mar 1983 Commodity Crude Oil. 5Yr CBT May 1988 Bond US Treasury Note.Table 12: Futures Contracts Descriptions. #11 World ICE Jan 1980 Commodity Silver NYMEX Jan 1980 Commodity Soybean Meal CBT Jan 1980 Commodity Wheat CBT Jan 1980 Commodity Gasoline. Chicago Mercantile Exchange (CME). CME Futures CBT Jan 2001 Commodity Cattle. RBOB NYMEX Jan 2001 Bond Eurodollar. Rough CBT Feb 1988 Commodity Soybean CBT Jan 1980 Commodity Sugar. Market Description Exchange First Observation Commodity Soybean Oil CBT Jan 1980 Commodity Corn CBT Jan 1980 Commodity Cocoa ICE Jan 1980 Commodity Crude Oil. Brent ICE Jun 1988 Commodity Cotton. 2 ICE Jan 1980 Commodity Milk CME Jan 1996 Commodity Ethanol. Live CME Jan 1980 Commodity Lean Hogs CME Apr 1986 Commodity Natural Gas NYMEX Apr 1990 Commodity Oats CBT Jan 1980 Commodity Palladium NYMEX Apr 1986 Commodity Platinum NYMEX Apr 1986 Commodity Gasoil ICE Jul 1989 Commodity Rice. 10Yr CBT May 1982 Bond US Treasury Long Bond CBT Jan 1980 Bond US Treasury Ultra Bond CBT Jan 2010 38 . They are traded on Chicago Board of Trade (CBOT). the Intercontinental Exchange (ICE). 3Mo CME Apr 1986 Bond US Treasury Note. The 63 futures contracts used in the paper are listed here. Feeder CME Jan 1980 Commodity Gold. ’C’ ICE Jan 1980 Commodity Lumber CME Apr 1986 Commodity Cattle. and the New York Mercantile Exchange (NYMEX). 100 oz NYMEX Jan 1980 Commodity Copper NYMEX Feb 1988 Commodity NY Harbor ULSD (Heating Oil) NYMEX Jul 1986 Commodity Co¤ee.

Table 12 (continued) Market Description Exchange First Observation Currency EUR/USD Future CME May 1998 Currency JPY/USD Future CME May 1986 Currency NZD/USD Future CME May 1997 Currency MXN/USD Future CME Apr 1995 Currency RUB/USD Future CME Apr 1998 Currency CHF/USD Future CME Apr 1986 Currency AUD/USD Future CME Jan 1987 Currency GBP/USD Future CME May 1986 Currency BRL/USD Future CME Jan 1995 Currency CAD/USD Future CME Apr 1986 Index DJ US Real Estate CBT Feb 2007 Index DJ Industrial Average Mini CBT Apr 2002 Index S&P 500 E-mini CME Sep 1997 Index S&P MidCap 400 E-mini CME Jan 2002 Index S&P E-mini Health Care Sector CME Mar 2011 Index S&P E-mini Materials Sector CME Mar 2011 Index S&P E-mini Industrial Sector CME Mar 2011 Index S&P E-mini Energy Sector CME Mar 2011 Index S&P E-mini Utilities Sector CME Mar 2011 Index S&P E-mini Technology Sector CME Mar 2011 Index NASDAQ 100 CME Apr 1996 Index Nikkei 225 Yen CME Feb 2004 Index NASDAQ 100 E-mini CME Jun 1999 Index Nikkei 225 CME Dec 1989 Index Russell 1000 Growth ICE May 2010 Index Russell 1000 Mini ICE Sep 2002 Index Russell 2000 Mini ICE Aug 2007 Index Russell 1000 Value ICE May 2010 Index S&P 500 CME Apr 1982 39 .