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Improving market timing of time series momentum in the Chinese stock market

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  • Yafeng Qin
  • Guoyao Pan
  • Min Bai

Abstract

This paper is the first study to present firm-level evidence that the time-series momentum (TSMOM) strategies with look-back-period k of 10 to 200 days outperform the buy-and-hold strategy (BH) on individual stocks in the Chinese stock market. We document that the optimal k* generating the best performance is different across assets and varies over time. We hence propose a model to predict the asset-specific and time-dependent k*, and examine the performance of the TSMOM strategies with the predicted k*. Our analysis shows that using the time-varying predicted k* substantially improves the predictability of the TSMOM strategies. Our new model and findings shed the light on trading strategy for both academia and applied investment practitioners.

Suggested Citation

  • Yafeng Qin & Guoyao Pan & Min Bai, 2020. "Improving market timing of time series momentum in the Chinese stock market," Applied Economics, Taylor & Francis Journals, vol. 52(43), pages 4711-4725, September.
    • Handle: RePEc:taf:applec:v:52:y:2020:i:43:p:4711-4725
    DOI: 10.1080/00036846.2020.1740160
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