Cross-Sectional and Time-Series Momentum Returns and Market States

13 Pages Posted: 16 Mar 2017 Last revised: 15 May 2017

Muhammad A. Cheema

University of Waikato New Zealand

Gilbert Nartea

University of Canterbury - College of Business and Law

Yimei Man

University of Waikato, Management School

Multiple version iconThere are 2 versions of this paper

Date Written: May 3, 2017

Abstract

Recent evidence on momentum returns shows that the time-series (TS) strategy outperforms the cross-sectional (CS) strategy. We present new evidence that this happens only when the market continues in the same state, UP or DOWN. In fact, we find that the TS strategy underperforms the CS strategy when the market transitions to a different state. Our results also show that the difference in momentum returns between TS and CS strategies is related to both the net long and net short positions of the TS strategy.

Keywords: momentum returns, cross-sectional, time-series, market states

JEL Classification: G11, G12, G14

Suggested Citation

Cheema, Muhammad A. and Nartea, Gilbert and Man, Yimei, Cross-Sectional and Time-Series Momentum Returns and Market States (May 3, 2017). Available at SSRN: https://ssrn.com/abstract=2931620 or http://dx.doi.org/10.2139/ssrn.2931620

Muhammad Ahmad Cheema (Contact Author)

University of Waikato New Zealand ( email )

Hamilton, 3216
New Zealand

Gilbert Nartea

University of Canterbury - College of Business and Law ( email )

Christchurch, 8140
New Zealand

Yimei Man

University of Waikato, Management School ( email )

Hamilton
New Zealand

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