Seize the Alpha: Pinpointing Larger Alpha Generating Opportunities

BofA research suggests investors can generate significant alpha by identifying 'High Risk' stocks (high beta/volatility) that possess 'Positive Triple Momentum' in earnings, price, and news sentiment.

Key Takeaways

• 1.Combining High Risk stocks with Positive Triple Momentum (earnings, price, and news catalysts) offers significantly higher alpha potential than Low Risk strategies.
• 2.Backtesting shows that the relative cumulative performance spread for High Risk + Positive Triple Momentum was 15.9% per annum compared to only 6.8% for Low Risk counterparts.
• 3.The outperformance of High Risk + PTM stocks is surprisingly persistent, with subsequent outperformance lasting 16 months on average.

Table of Contents

• Risk and Triple Momentum Performance
• Methodology
• Risks and Limitations
• Stock Screens: Risk + Triple Momentum
• Performance Calculation Methodology

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