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

Gilbert V. Nartea

University of Waikato

Yimei Man

University of Waikato

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 V. and Man, Yimei, Cross-Sectional and Time-Series Momentum Returns and Market States (May 3, 2017). Available at SSRN: https://ssrn.com/abstract=2931620

Muhammad Ahmad Cheema (Contact Author)

University of Waikato ( email )

Hamilton, 3216
New Zealand

Gilbert V. Nartea

University of Waikato ( email )

Te Raupapa
Private Bag 3105
Hamilton, 3240
New Zealand

Yimei Man

University of Waikato ( email )

Hamilton
New Zealand

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