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Time series momentum: Is it there?

Author

Listed:
  • Huang, Dashan
  • Li, Jiangyuan
  • Wang, Liyao
  • Zhou, Guofu

Abstract

Time series momentum (TSM) refers to the predictability of the past 12-month return on the next one-month return and is the focus of several recent influential studies. This paper shows that asset-by-asset time series regressions reveal little evidence of TSM, both in- and out-of-sample. While the t-statistic in a pooled regression appears large, it is not statistically reliable as it is less than the critical values of parametric and nonparametric bootstraps. From an investment perspective, the TSM strategy is profitable, but its performance is virtually the same as that of a similar strategy that is based on historical sample mean and does not require predictability. Overall, the evidence on TSM is weak, particularly for the large cross section of assets.

Suggested Citation

  • Huang, Dashan & Li, Jiangyuan & Wang, Liyao & Zhou, Guofu, 2020. "Time series momentum: Is it there?," Journal of Financial Economics, Elsevier, vol. 135(3), pages 774-794.
    • Handle: RePEc:eee:jfinec:v:135:y:2020:i:3:p:774-794
    DOI: 10.1016/j.jfineco.2019.08.004
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    More about this item

    Keywords

    Time series momentum; Risk premium; Return predictability; Pooled regression;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications

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