IDEAS home Printed from https://ideas.repec.org/a/eee/jbfina/v97y2018icp283-296.html
   My bibliography  Save this article

Time-series momentum in nearly 100 years of stock returns

Author

Listed:
  • Lim, Bryan Y.
  • Wang, Jiaguo (George)
  • Yao, Yaqiong

Abstract

We document strong time-series momentum effects in individual stocks in the US markets from 1927 to 2017. Time-series momentum is not specific to sub-periods, firm sizes, formation- and holding-period lengths, or geographic markets. The effects persist after controlling for standard risk factors. Time-series momentum effects are conditional on the market state, the information discreteness of the constituent stocks and investor sentiment. We propose two alternative implementations, revised time-series momentum and dual momentum, which generate even higher profits than standard time-series momentum.

Suggested Citation

  • Lim, Bryan Y. & Wang, Jiaguo (George) & Yao, Yaqiong, 2018. "Time-series momentum in nearly 100 years of stock returns," Journal of Banking & Finance, Elsevier, vol. 97(C), pages 283-296.
    • Handle: RePEc:eee:jbfina:v:97:y:2018:i:c:p:283-296
    DOI: 10.1016/j.jbankfin.2018.10.010
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0378426618302346
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jbankfin.2018.10.010?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Antoniou, Constantinos & Doukas, John A. & Subrahmanyam, Avanidhar, 2013. "Cognitive Dissonance, Sentiment, and Momentum," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 48(1), pages 245-275, February.
    2. Shleifer, Andrei & Summers, Lawrence H, 1990. "The Noise Trader Approach to Finance," Journal of Economic Perspectives, American Economic Association, vol. 4(2), pages 19-33, Spring.
    3. Sanjeev Bhojraj, 2006. "Macromomentum: Returns Predictability in International Equity Indices," The Journal of Business, University of Chicago Press, vol. 79(1), pages 429-451, January.
    4. Lesmond, David A. & Schill, Michael J. & Zhou, Chunsheng, 2004. "The illusory nature of momentum profits," Journal of Financial Economics, Elsevier, vol. 71(2), pages 349-380, February.
    5. Dashan Huang & Fuwei Jiang & Jun Tu & Guofu Zhou, 2015. "Investor Sentiment Aligned: A Powerful Predictor of Stock Returns," The Review of Financial Studies, Society for Financial Studies, vol. 28(3), pages 791-837.
    6. Malcolm Baker & Jeffrey Wurgler, 2006. "Investor Sentiment and the Cross‐Section of Stock Returns," Journal of Finance, American Finance Association, vol. 61(4), pages 1645-1680, August.
    7. Narasimhan Jegadeesh, 2002. "Cross-Sectional and Time-Series Determinants of Momentum Returns," The Review of Financial Studies, Society for Financial Studies, vol. 15(1), pages 143-157, March.
    8. Zhi Da & Umit G. Gurun & Mitch Warachka, 2014. "Frog in the Pan: Continuous Information and Momentum," The Review of Financial Studies, Society for Financial Studies, vol. 27(7), pages 2171-2218.
    9. Yao, Yaqiong, 2012. "Momentum, contrarian, and the January seasonality," Journal of Banking & Finance, Elsevier, vol. 36(10), pages 2757-2769.
    10. repec:bla:jfinan:v:59:y:2004:i:3:p:1039-1082 is not listed on IDEAS
    11. Tobias J. Moskowitz & Mark Grinblatt, 1999. "Do Industries Explain Momentum?," Journal of Finance, American Finance Association, vol. 54(4), pages 1249-1290, August.
    12. Julien Cujean & Michael Hasler, 2017. "Why Does Return Predictability Concentrate in Bad Times?," Journal of Finance, American Finance Association, vol. 72(6), pages 2717-2758, December.
    13. Christopher J. Neely & David E. Rapach & Jun Tu & Guofu Zhou, 2014. "Forecasting the Equity Risk Premium: The Role of Technical Indicators," Management Science, INFORMS, vol. 60(7), pages 1772-1791, July.
    14. John M. Griffin & Xiuqing Ji & J. Spencer Martin, 2003. "Momentum Investing and Business Cycle Risk: Evidence from Pole to Pole," Journal of Finance, American Finance Association, vol. 58(6), pages 2515-2547, December.
    15. Tarun Chordia & Lakshmanan Shivakumar, 2002. "Momentum, Business Cycle, and Time‐varying Expected Returns," Journal of Finance, American Finance Association, vol. 57(2), pages 985-1019, April.
    16. Grundy, Bruce D & Martin, J Spencer, 2001. "Understanding the Nature of the Risks and the," The Review of Financial Studies, Society for Financial Studies, vol. 14(1), pages 29-78.
    17. Byun, Suk Joon & Lim, Sonya S. & Yun, Sang Hyun, 2016. "Continuing Overreaction and Stock Return Predictability," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 51(6), pages 2015-2046, December.
    18. Andy C.W. Chui & Sheridan Titman & K.C. John Wei, 2010. "Individualism and Momentum around the World," Journal of Finance, American Finance Association, vol. 65(1), pages 361-392, February.
    19. Robert Novy-Marx & Mihail Velikov, 2016. "A Taxonomy of Anomalies and Their Trading Costs," The Review of Financial Studies, Society for Financial Studies, vol. 29(1), pages 104-147.
    20. Keim, Donald B. & Stambaugh, Robert F., 1986. "Predicting returns in the stock and bond markets," Journal of Financial Economics, Elsevier, vol. 17(2), pages 357-390, December.
    21. Fama, Eugene F. & French, Kenneth R., 2015. "A five-factor asset pricing model," Journal of Financial Economics, Elsevier, vol. 116(1), pages 1-22.
    22. Gary B. Gorton & Fumio Hayashi & K. Geert Rouwenhorst, 2013. "The Fundamentals of Commodity Futures Returns," Review of Finance, European Finance Association, vol. 17(1), pages 35-105.
    23. Clifford S. Asness & Tobias J. Moskowitz & Lasse Heje Pedersen, 2013. "Value and Momentum Everywhere," Journal of Finance, American Finance Association, vol. 68(3), pages 929-985, June.
    24. repec:bla:jfinan:v:53:y:1998:i:1:p:267-284 is not listed on IDEAS
    25. Brennan, Michael J. & Chordia, Tarun & Subrahmanyam, Avanidhar, 1998. "Alternative factor specifications, security characteristics, and the cross-section of expected stock returns," Journal of Financial Economics, Elsevier, vol. 49(3), pages 345-373, September.
    26. Moskowitz, Tobias J. & Ooi, Yao Hua & Pedersen, Lasse Heje, 2012. "Time series momentum," Journal of Financial Economics, Elsevier, vol. 104(2), pages 228-250.
    27. Novy-Marx, Robert, 2012. "Is momentum really momentum?," Journal of Financial Economics, Elsevier, vol. 103(3), pages 429-453.
    28. Jegadeesh, Narasimhan & Titman, Sheridan, 1993. "Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency," Journal of Finance, American Finance Association, vol. 48(1), pages 65-91, March.
    29. Laura Xiaolei Liu & Lu Zhang, 2008. "Momentum Profits, Factor Pricing, and Macroeconomic Risk," The Review of Financial Studies, Society for Financial Studies, vol. 21(6), pages 2417-2448, November.
    30. Amit Goyal & Narasimhan Jegadeesh, 2018. "Cross-Sectional and Time-Series Tests of Return Predictability: What Is the Difference?," The Review of Financial Studies, Society for Financial Studies, vol. 31(5), pages 1784-1824.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bacchetta, Philippe & Davenport, Margaret & van Wincoop, Eric, 2022. "Can sticky portfolios explain international capital flows and asset prices?," Journal of International Economics, Elsevier, vol. 136(C).
    2. Hutchinson, Mark C. & Kyziropoulos, Panagiotis E. & O’Brien, John & O’Reilly, Philip & Sharma, Tripti, 2022. "Technical trading rule profitability in currencies: It’s all about momentum," Research in International Business and Finance, Elsevier, vol. 63(C).
    3. Simarjeet Singh & Nidhi Walia, 2022. "Momentum investing: a systematic literature review and bibliometric analysis," Management Review Quarterly, Springer, vol. 72(1), pages 87-113, February.
    4. Pätäri, Eero & Ahmed, Sheraz & Luukka, Pasi & Yeomans, Julian Scott, 2023. "Can monthly-return rank order reveal a hidden dimension of momentum? The post-cost evidence from the U.S. stock markets," The North American Journal of Economics and Finance, Elsevier, vol. 65(C).
    5. Chu, Xiaojun & Gu, Zherong & Zhou, Haigang, 2019. "Intraday momentum and reversal in Chinese stock market," Finance Research Letters, Elsevier, vol. 30(C), pages 83-88.
    6. Yufeng Han & Lingfei Kong, 2022. "A trend factor in commodity futures markets: Any economic gains from using information over investment horizons?," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 42(5), pages 803-822, May.
    7. Wen, Danyan & Wang, Yudong & Zhang, Yaojie, 2021. "Intraday return predictability in China’s crude oil futures market: New evidence from a unique trading mechanism," Economic Modelling, Elsevier, vol. 96(C), pages 209-219.
    8. Zhong, Hao & He, Xiaoxiao & Li, Yuqi, 2024. "Is there a time-series momentum effect in the Asian crude oil futures market?," Pacific-Basin Finance Journal, Elsevier, vol. 86(C).
    9. Simarjeet Singh & Nidhi Walia & Sivagandhi Saravanan & Preeti Jain & Avtar Singh & Jinesh jain, 2021. "Mapping the scientific research on alternative momentum investing: a bibliometric analysis," Journal of Economic and Administrative Sciences, Emerald Group Publishing Limited, vol. 38(4), pages 619-636, April.
    10. Ma, Yao & Yang, Baochen & Su, Yunpeng, 2020. "Technical trading index, return predictability and idiosyncratic volatility," International Review of Economics & Finance, Elsevier, vol. 69(C), pages 879-900.
    11. Zakamulin, Valeriy & Giner, Javier, 2022. "Time series momentum in the US stock market: Empirical evidence and theoretical analysis," International Review of Financial Analysis, Elsevier, vol. 82(C).
    12. Yin, Libo & Wei, Ya, 2020. "Aggregate profit instability and time variations in momentum returns: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 60(C).
    13. Valeriy Zakamulin & Javier Giner, 2024. "Optimal trend-following rules in two-state regime-switching models," Journal of Asset Management, Palgrave Macmillan, vol. 25(4), pages 327-348, July.
    14. repec:eme:jefasp:jefas-08-2021-0159 is not listed on IDEAS
    15. Giner, Javier & Zakamulin, Valeriy, 2023. "A regime-switching model of stock returns with momentum and mean reversion," Economic Modelling, Elsevier, vol. 122(C).
    16. Ramzi Boussaidi & Majed Ibrahim AlSaggaf, 2024. "Post-Earnings Announcement Drift, Momentum, and Contrarian Strategies in the Saudi Stock Market: Risk Explanation vs. Behavioral Explanation," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(3), pages 13622-13653, September.
    17. Ma, Yao & Yang, Baochen & Ye, Tao, 2024. "Quality acceleration and cross-sectional returns: Empirical evidence," Research in International Business and Finance, Elsevier, vol. 69(C).
    18. Li, Yi & Shen, Dehua & Wang, Pengfei & Zhang, Wei, 2020. "Does intraday time-series momentum exist in Chinese stock index futures market?," Finance Research Letters, Elsevier, vol. 35(C).
    19. Zakamulin, Valeriy & Giner, Javier, 2023. "Optimal trend-following with transaction costs," International Review of Financial Analysis, Elsevier, vol. 90(C).
    20. Ruzhen Yan & Ding Yue & Xu Wu & Wei Gao, 2023. "Multiscale Multifractal Detrended Fluctuation Analysis and Trend Identification of Liquidity in the China's Stock Markets," Computational Economics, Springer;Society for Computational Economics, vol. 61(2), pages 487-511, February.
    21. Li, Zeming & Sakkas, Athanasios & Urquhart, Andrew, 2022. "Intraday time series momentum: Global evidence and links to market characteristics," Journal of Financial Markets, Elsevier, vol. 57(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Adam Zaremba & Jacob Koby Shemer, 2018. "Price-Based Investment Strategies," Springer Books, Springer, number 978-3-319-91530-2, June.
    2. Hong-Yi Chen & Sheng-Syan Chen & Chin-Wen Hsin & Cheng Few Lee, 2020. "Does Revenue Momentum Drive or Ride Earnings or Price Momentum?," World Scientific Book Chapters, in: Cheng Few Lee & John C Lee (ed.), HANDBOOK OF FINANCIAL ECONOMETRICS, MATHEMATICS, STATISTICS, AND MACHINE LEARNING, chapter 94, pages 3263-3318, World Scientific Publishing Co. Pte. Ltd..
    3. Subrahmanyam, Avanidhar, 2018. "Equity market momentum: A synthesis of the literature and suggestions for future work," Pacific-Basin Finance Journal, Elsevier, vol. 51(C), pages 291-296.
    4. Simarjeet Singh & Nidhi Walia, 2022. "Momentum investing: a systematic literature review and bibliometric analysis," Management Review Quarterly, Springer, vol. 72(1), pages 87-113, February.
    5. Sina Ehsani & Juhani T. Linnainmaa, 2019. "Factor Momentum and the Momentum Factor," NBER Working Papers 25551, National Bureau of Economic Research, Inc.
    6. Li, Kai, 2021. "Nonlinear effect of sentiment on momentum," Journal of Economic Dynamics and Control, Elsevier, vol. 133(C).
    7. Du, Qianqian & Liang, Dawei & Chen, Zilin & Tu, Jun, 2022. "Concept links and return momentum," Journal of Banking & Finance, Elsevier, vol. 134(C).
    8. Docherty, Paul & Hurst, Gareth, 2018. "Return dispersion and conditional momentum returns: International evidence," Pacific-Basin Finance Journal, Elsevier, vol. 50(C), pages 263-278.
    9. Kim, Byungoh & Suh, Sangwon, 2018. "Sentiment-based momentum strategy," International Review of Financial Analysis, Elsevier, vol. 58(C), pages 52-68.
    10. Liu, Chenye & Wu, Ying & Zhu, Dongming, 2022. "Price overreaction to up-limit events and revised momentum strategies in the Chinese stock market," Economic Modelling, Elsevier, vol. 114(C).
    11. Chen, Tsung-Yu & Chou, Pin-Huang & Hsieh, Chia-Hsun & Ghon Rhee, S., 2021. "Momentum life cycle, revisited," Journal of Banking & Finance, Elsevier, vol. 127(C).
    12. Hannah Lea Hühn & Hendrik Scholz, 2018. "Alpha Momentum and Price Momentum," IJFS, MDPI, vol. 6(2), pages 1-28, May.
    13. Tobias Wiest, 2023. "Momentum: what do we know 30 years after Jegadeesh and Titman’s seminal paper?," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 37(1), pages 95-114, March.
    14. Mao, Mike Qinghao & Wei, K.C. John, 2014. "Price and earnings momentum: An explanation using return decomposition," Journal of Empirical Finance, Elsevier, vol. 28(C), pages 332-351.
    15. Zaremba, Adam & Szyszka, Adam & Karathanasopoulos, Andreas & Mikutowski, Mateusz, 2021. "Herding for profits: Market breadth and the cross-section of global equity returns," Economic Modelling, Elsevier, vol. 97(C), pages 348-364.
    16. Chen, Zhanhui & Yang, Bowen, 2019. "In search of preference shock risks: Evidence from longevity risks and momentum profits," Journal of Financial Economics, Elsevier, vol. 133(1), pages 225-249.
    17. Fernando F. Ferreira & A. Christian Silva & Ju-Yi Yen, 2014. "Information ratio analysis of momentum strategies," Papers 1402.3030, arXiv.org, revised Jul 2014.
    18. Chang, Rosita P. & Ko, Kuan-Cheng & Nakano, Shinji & Ghon Rhee, S., 2018. "Residual momentum in Japan," Journal of Empirical Finance, Elsevier, vol. 45(C), pages 283-299.
    19. Martin H. Schmidt, 2017. "Trading strategies based on past returns: evidence from Germany," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 31(2), pages 201-256, May.
    20. Min, Byoung-Kyu & Kim, Tong Suk, 2016. "Momentum and downside risk," Journal of Banking & Finance, Elsevier, vol. 72(S), pages 104-118.

    More about this item

    Keywords

    Time-series stock momentum; Return predictability; Market efficiency;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jbfina:v:97:y:2018:i:c:p:283-296. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jbf .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.