Momentum portfolio sorted by volatility generates better profits than well-known return based momentum strategies. The correlations are low as well. These excess returns are not explained by market timing, investor sentiment, default and liquidity risk. Similar results hold if the portfolios are sorted based on other proxies of information uncertainty (size, distance to default, credit rating, analyst forecast dispersion, earnings volatility). The more noise-to-signal ratio or the more uncertain the information, the more profitable the technical analysis.
Strategy: Buy or remain long the portfolio today when yesterday's price is above its 10-day MA price, to to invest in risk-free asset otherwise. This is compared against buy-and-hold, for the top decile.