Adam ZarembaMehmet UmutluAlina MaydyburaMaydybura, AlinaZaremba, AdamUmutlu, Mehmet2025-10-06201810293523, 207702271029-35232077-022710.1080/10293523.2018.14692902-s2.0-85050915515https://www.scopus.com/inward/record.uri?eid=2-s2.0-85050915515&doi=10.1080%2F10293523.2018.1469290&partnerID=40&md5=3f817a099518323415a4c3f3c3e07cdehttps://gcris.yasar.edu.tr/handle/123456789/9624https://doi.org/10.1080/10293523.2018.1469290We offer a new type of momentum strategy — the volatility-adjusted residual momentum (VARMOM) — which is based on average past residuals scaled with their volatility. We demonstrate its application for international asset allocation within 51 country indexes and 888 industry portfolios from developed and emerging markets. The VARMOM trading strategy notably outperforms and subsumes a standard momentum strategy delivering Sharpe ratios that are two to three times higher. The VARMOM is particularly strong across portfolios characterised by high limits to arbitrage and following bull markets supporting the behavioural explanation of momentum. The results are robust to alternative portfolio construction methods as well as the inclusion of trading costs and control variables. They are also valid for several subperiods and subsamples. © 2018 Elsevier B.V. All rights reserved.Englishinfo:eu-repo/semantics/closedAccessAsset Pricing, Country Momentum, Cross Section Of Returns, Equity Anomalies, Industry Momentum, International Investment, Residual Momentum, Return Predictability, Varmom, Volatility-adjusted MomentumInternational InvestmentResidual MomentumIndustry MomentumCountry MomentumEquity AnomaliesReturn PredictabilityCross Section of ReturnsVolatility-Adjusted MomentumVARMOMAsset PricingArticle