Reducing Turnover and Transaction Costs With a New Class of Equity Reversal Signals Based on Volatility Differences
Author: Anthony A. Renshaw, PhD
Short-term momentum (STM) is, perhaps, the most well-known equity reversal signal, but is limited in its real world application due to turnover and transaction costs. In this paper, we present three new equity reversal signals. Each new signal exhibits prototypical reversal behavior, and two of them exhibit roughly half the turnover associated with STM.