Cross-Asset Signals and Time Series Momentum

81 Pages Posted: 31 Dec 2016 Last revised: 23 Feb 2019

See all articles by Aleksi Pitkäjärvi

Aleksi Pitkäjärvi

Aalto University School of Business

Matti Suominen

Aalto University School of Business

Lauri Vaittinen

Independent

Date Written: January 6, 2019

Abstract

We document a new phenomenon in bond and equity markets that we call cross-asset time series momentum. Using data from 20 countries, we show that past bond market returns are positive predictors of future equity market returns, and past equity market returns are negative predictors of future bond market returns. We use this predictability to construct a diversified cross-asset time series momentum portfolio that yields a Sharpe ratio 45% higher than a standard time series momentum portfolio. We present evidence that time series momentum and cross-asset time series momentum are driven by slow-moving capital in bond and equity markets.

Keywords: asset pricing, time series momentum, cross-asset predictability, international financial markets, market efficiency, slow-moving capital

JEL Classification: G12, G15, G17, F37

Suggested Citation

Pitkäjärvi, Aleksi and Suominen, Matti and Vaittinen, Lauri Tapani, Cross-Asset Signals and Time Series Momentum (January 6, 2019). Available at SSRN: https://ssrn.com/abstract=2891434 or http://dx.doi.org/10.2139/ssrn.2891434

Aleksi Pitkäjärvi

Aalto University School of Business ( email )

P.O. Box 21210
Helsinki, 00101
Finland

Matti Suominen (Contact Author)

Aalto University School of Business ( email )

PO Box 1210
FI-00101 Helsinki
Finland
+358-50-5245678 (Phone)

Lauri Tapani Vaittinen

Independent ( email )

No Address Available

Register to save articles to
your library

Register

Paper statistics

Downloads
1,090
Abstract Views
3,408
rank
19,058
PlumX Metrics