Time Series Momentum and Macroeconomic Risk

45 Pages Posted: 18 Jan 2015 Last revised: 9 Oct 2018

See all articles by Mark C. Hutchinson

Mark C. Hutchinson

University College Cork

John O'Brien

University College Cork - Department of Accounting, Finance and Information Systems; University College Cork - Cork University Business School

Date Written: October 2018

Abstract

The time series momentum strategy has been shown to deliver consistent profitability over a long time horizon. Funds pursuing these strategies are now a component of many institutional portfolios, due to the expectation of positive returns in equity bear markets. However, the return drivers of the strategy and its performance in other economic conditions are less well understood. The authors find evidence that the returns to the strategy are connected to the business cycle. Returns are positive in both recessions and expansions, but profitability is especially high in expansions. About 40% of returns are due to time varying factor-related risk exposure, consistent with rational asset pricing theories having a role in explaining the profitability of the strategy.

Keywords: Trend Following, Time Series Momentum, Macroeconomic Risk, CTA

JEL Classification: G10, G19

Suggested Citation

Hutchinson, Mark C. and O'Brien, John, Time Series Momentum and Macroeconomic Risk (October 2018). Available at SSRN: https://ssrn.com/abstract=2550718 or http://dx.doi.org/10.2139/ssrn.2550718

Mark C. Hutchinson (Contact Author)

University College Cork ( email )

O'Rahilly Building
College Road
Cork
Ireland

John O'Brien

University College Cork - Department of Accounting, Finance and Information Systems ( email )

O'Rahilly Building
College Road
Cork
Ireland

University College Cork - Cork University Business School ( email )

West Wing, Main Quadrangle, College Road
Cork
Ireland

Register to save articles to
your library

Register

Paper statistics

Downloads
496
Abstract Views
1,814
rank
56,008
PlumX Metrics