Time Series Momentum
Tobias J. Moskowitz
University of Chicago - Booth School of Business; AQR Capital; National Bureau of Economic Research (NBER)
Yao Hua Ooi
AQR Capital Management, LLC
Lasse Heje Pedersen
Copenhagen Business School; New York University (NYU); AQR Capital Management, LLC; Centre for Economic Policy Research (CEPR)
September 1, 2011
Chicago Booth Research Paper No. 12-21
Fama-Miller Working Paper
We document significant “time series momentum” in equity index, currency, commodity, and bond futures for each of the 58 liquid instruments we consider. We find persistence in returns for 1 to 12 months that partially reverses over longer horizons, consistent with sentiment theories of initial under-reaction and delayed over-reaction. A diversified portfolio of time series momentum strategies across all asset classes delivers substantial abnormal returns with little exposure to standard asset pricing factors and performs best during extreme markets. Examining the trading activities of speculators and hedgers, we find that speculators profit from time series momentum at the expense of hedgers.
Number of Pages in PDF File: 62
Date posted: June 23, 2012
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