Momentum crashes, defined as extremely negative returns of momentum portfolios, occur in most developed stock markets and are centered in economic recovery periods after recessions. I find that their negative returns and negative market betas are associated with investor behavior known as flights to quality (FTQ). Low quality - i.e., high default risk - stocks experience larger investor withdrawals and consequential stock price plunges at financial market collapses, featuring higher market betas particularly during recessions. So the momentum strategies, which tend to sell these plunging stocks, exhibit negative market betas before their crashes and underperform once those stocks bounce back to an economic recovery phase. Worldwide momentum returns and two FTQ proxies, US institutional ownership changes and stock market-bond market disagreements, show consistent results.​

Keywords: Momentum crashes, flights to quality, flights to safety, international asset pricing

JEL classification: G12, G15, G23.