Return Signal Momentum

62 Pages Posted: 22 May 2017 Last revised: 16 Feb 2021

See all articles by Fotis Papailias

Fotis Papailias

King’s College London - King's Business School; Knot Analytics Ltd

Jiadong Liu

Queen's University Belfast - Queen's Management School

Dimitrios D. Thomakos

University of Athens, Department of Business Administration

Date Written: February 15, 2019

Abstract

A new type of momentum based on the signs of past returns is introduced. This momentum is driven primarily by sign dependence, which is positively related to average return and negatively related to return volatility. An empirical application using a universe of commodity and financial futures offers supporting evidence for the existence of such momentum. Investment strategies based on return signal momentum result in higher returns and Sharpe ratios and lower drawdown relative to time series momentum and other benchmark strategies. Overall, return signal momentum can benefit investors as an effective strategy for speculation and hedging.

Keywords: Return Sign, Trading Strategies, Market Timing, Time Series Momentum

JEL Classification: G11, G12, G15

Suggested Citation

Papailias, Fotis and Liu, Jiadong and Thomakos, Dimitrios D., Return Signal Momentum (February 15, 2019). Journal of Banking and Finance, Forthcoming, QMS Research Paper 2019/04, Available at SSRN: https://ssrn.com/abstract=2971444 or http://dx.doi.org/10.2139/ssrn.2971444

Fotis Papailias (Contact Author)

King’s College London - King's Business School ( email )

150 Stamford Street
London, SE1 9NH
United Kingdom

Knot Analytics Ltd ( email )

Lytchett House, 13 Freeland Park
Wareham Road
Poole, BH16 6FA
United Kingdom

Jiadong Liu

Queen's University Belfast - Queen's Management School ( email )

Riddel Hall
185 Stranmillis Road
Belfast, BT9 5EE
United Kingdom

Dimitrios D. Thomakos

University of Athens, Department of Business Administration ( email )

Athens
Greece

HOME PAGE: http://ba.uoa.gr/

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