State-Dependent Momentum in International Stock Markets

37 Pages Posted: 10 Jul 2012

See all articles by Dirk G. Baur

Dirk G. Baur

University of Western Australia - Business School; Financial Research Network (FIRN)

Thomas Dimpfl

University of Tuebingen - Department of Statistics and Econometrics

Date Written: July 2012

Abstract

We estimate quantile autoregression (QAR) models to analyze variations in the autoregressive coefficients of 55 international stock index returns and demonstrate that it is important to allow the autoregressive parameters to vary with quantiles. The empirical results identify distinctively different patterns of autoregressive coefficients in the lower, central and upper quantiles of the distribution across all countries. More specifically, the study suggests that investors follow momentum strategies in lower quantiles or "bad states''. We also demonstrate that the quantile autoregression estimates can be used to test for asymmetric responses of the volatility.

Keywords: quantile autoregression (QAR), return autocorrelation, investor behavior, momentum, underreaction, financial crisis

JEL Classification: C22, G15

Suggested Citation

Baur, Dirk G. and Dimpfl, Thomas, State-Dependent Momentum in International Stock Markets (July 2012). Available at SSRN: https://ssrn.com/abstract=2103315 or http://dx.doi.org/10.2139/ssrn.2103315

Dirk G. Baur (Contact Author)

University of Western Australia - Business School ( email )

School of Business
35 Stirling Highway
Crawley, Western Australia 6009
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Thomas Dimpfl

University of Tuebingen - Department of Statistics and Econometrics ( email )

Germany

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