Time-series momentum in nearly 100 years of stock returns

Lim, Bryan; Wang, Jiaguo George; Yao, Yaqiong

doi:10.1016/j.jbankfin.2018.10.010

Cited by 59 publications

(29 citation statements)

References 51 publications

(54 reference statements)

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“…Both strategies perform superior returns in the short window (12 months' formation and one month holding period) than the long window (12 months' formation and 12 months holding period). Consistent with the findings of Lim et al (2018), absolute momentum strategies generate superior returns than relative momentum strategies (in all cases). Absolute momentum payoffs remain significant in longer time frames signalling that unlike relative momentum strategies, these strategies do not reverse in the long run.…”

Section: Discussionsupporting

confidence: 82%

“…They reported that absolute momentum strategies perform better than relative momentum strategies and "time-varying net long position" is the main source behind this superiority. Lim, Wang and Yao (2018) proved that absolute momentum effect is pervasive as they proved the efficacy of time-series momentum strategies across multiple geographical markets and sub-periods.…”

Section: Literature Reviewmentioning

confidence: 98%

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Time-Series and Cross-Sectional Momentum in Indian Stock Market

Singh

Walia

2021

CJFA

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Present study documents the significant time-series and cross-sectional momentum profits in Indian stock market. These profits remain significant even after adjusting market, size and value factors. Further time-series momentum effect remains significant when we hold securities for longer period signalling that time-series momentum do not reverse in the long run. When we compare the performances of time series and cross-sectional momentum payoffs, we find that time-series momentum strategies generate superior returns than cross-sectional momentum strategies and net long investments in time-series momentum strategies is the main source of difference between the performances of these two approaches.

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Section: Discussionsupporting

confidence: 82%

Section: Literature Reviewmentioning

confidence: 98%

Time-Series and Cross-Sectional Momentum in Indian Stock Market

Singh

Walia

2021

CJFA

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“…Also related to this area of research is time-series momentum, first proposed by Moskowitz, Ooi, and Pedersen (2012) where the previous 12-month return of an asset positively predicts future returns. 1 This finding has been strongly supported in the literature by Asness, Moskowitz, and Pedersen (2013), Georgopoulou and Wang (2017), Lim, Wang, and Yao (2018) and Hurst, Ooi, and Pedersen (2017). The literature on momentum crashes (Daniel and Moskowitz 2016) is also potentially relevant to our work although it largely deals with cross-sectional rather than time-series momentum.…”

Section: The Tendency For Prices To Trendsupporting

confidence: 62%

Nonlinearity everywhere: implications for empirical finance, technical analysis and value at risk

Amini

Hudson

Urquhart

et al. 2021

The European Journal of Finance

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We show that expected returns on US stocks and all major global stock market indices have a particular form of non-linear dependence on previous returns. The expected sign of returns tends to reverse after large price movements and trends tend to continue after small movements. The observed market properties are consistent with various models of investor behaviour and can be captured by a simple polynomial model. We further discuss a number of important implications of our findings. Incorrectly fitting a simple linear model to the data leads to a substantial bias in coefficient estimates. We show through the polynomial model that well-known short-term technical trading rules may be substantially driven by the non-linear behaviour observed. The behaviour also has implications for the appropriate calculation of important risk measures such as value at risk.

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“…A significant body of additional research finds that the momentum strategy is profitable in several other markets outside the United States [5] A related stream of research focuses on time series momentum of individual stocks, including Moskowitz et al (2012) and Lim et al 2018; Wang et al (2018). The momentum strategy has also proved successful when applied to mutual funds, especially prior to the ETF era.…”

Section: Review Of Literature On Momentum Investment Strategiesmentioning

confidence: 99%

Empirical evidence on the profitability of momentum trading strategies using ETFs

Yu¹,

Webb

2020

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PurposeWe extend empirical evidence on the profitability of momentum trading to the realm of plain-equity ETFs.Design/methodology/approachWe employ several ranking measures used in prior research, and for each we apply a traditional ranking based on total return, and a variation based only on the capital gain/loss portion of return.FindingsWhile we find that past momentum is not a strong predictor of future performance in our overall sample period, 2007 to June 2018, we find that the percent off 52-week high price results in positive performance in the recovery years following the financial crisis of 2008–2009.Research limitations/implicationsOur study is limited by the availability of ETF experience and data, and our test period covers just 2007 through June 2018. This period includes the financial crisis of 2008–2009, which previous research finding is associated with the momentum strategy's loss of profitability. When we exclude that period, we find evidence of a profitable momentum strategy based on the measure of percent off 52-week high price, enabling us to reject the null hypothesis that the momentum trading strategy is no longer profitable.Practical implicationsIt is profitable based on both return measures used in the rankings. Our finding of a profitable momentum trading strategy suggests that the null hypothesis that the momentum strategy is no longer profitable can be rejected.Originality/valueWhile perhaps not so strong as to reject the efficient markets hypothesis fully, our empirical findings are more consistent with a behavioral explanation and a market inefficiency. In view of the relative ease and low transactional costs of trading in ETFs, the markets have yet another opportunity to recognize an apparent mispricing and employ arbitrage based on it. To the extent that the relative ease of trading in ETFs makes momentum strategies easier to employ, the momentum anomaly might still be expected to disappear in an efficient market.

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Time-series momentum in nearly 100 years of stock returns

Cited by 59 publications

References 51 publications

Time-Series and Cross-Sectional Momentum in Indian Stock Market

Time-Series and Cross-Sectional Momentum in Indian Stock Market

Nonlinearity everywhere: implications for empirical finance, technical analysis and value at risk

Empirical evidence on the profitability of momentum trading strategies using ETFs

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