Time-series momentum: Is it there?

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, however, that asset-by-asset time-series regressions reveal little evidence of TSM, both in- and out-of-sample....

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Bibliographic Details
Main Authors: HUANG, Dashan, LI, Jiangyuan, WANG, Liyao, ZHOU, Guofu
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2020
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Online Access:https://ink.library.smu.edu.sg/lkcsb_research/6521
https://ink.library.smu.edu.sg/context/lkcsb_research/article/7520/viewcontent/Time_series_momentum_JFE_sv.pdf
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Institution: Singapore Management University
Language: English
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Summary: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, however, 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 non-parametric 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.