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Risk-managed time-series momentum: an emerging economy experience

Author

Listed:
  • Simarjeet Singh
  • Nidhi Walia
  • Stelios Bekiros
  • Arushi Gupta
  • Jigyasu Kumar
  • Amar Kumar Mishra

Abstract

Purpose - This research study aims to design a novel risk-managed time-series momentum approach. The present study also examines the time-series momentum effect in the Indian equity market. Apart from this, the study also proposes a novel risk-managed time-series momentum approach. Design/methodology/approach - The study considers the adjusted monthly closing prices of the stocks listed on the Bombay Stock Exchange from January 1996 to December 2020 to formulate long-short portfolios. Newey–Westtstatistics were used to test the significance of momentum returns. The present research has considered standard risk factors, i.e. market, size and value, to evaluate the risk-adjusted performance of time-series momentum portfolios. Findings - The present research reports a substantial absolute momentum effect in the Indian equity market. However, absolute momentum strategies are exposed to occasional severe losses. The proposed time-series momentum approach not only yields 2.5 times higher return than the standard time-series momentum approach but also causes substantial enhancement in downside risks and higher-order moments. Practical implications - The study's outcomes offer valuable insights for professional investors, capital market regulators and asset management companies. Originality/value - This study is one of the pioneers attempting to test the time-series momentum effect in emerging economies. Besides, current research contributes to the escalating literature on risk-managed momentum by suggesting a novel revised time-series momentum approach.

Suggested Citation

  • Simarjeet Singh & Nidhi Walia & Stelios Bekiros & Arushi Gupta & Jigyasu Kumar & Amar Kumar Mishra, 2022. "Risk-managed time-series momentum: an emerging economy experience," Journal of Economics, Finance and Administrative Science, Emerald Group Publishing Limited, vol. 27(54), pages 328-343, November.
    • Handle: RePEc:eme:jefasp:jefas-08-2021-0159
    DOI: 10.1108/JEFAS-08-2021-0159
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    References listed on IDEAS

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    More about this item

    Keywords

    Time-series momentum; Risk-managed time-series momentum; Indian stock market; G12; G13;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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