Time-Series Momentum: Is It There?
41 Pages Posted: 6 May 2018 Last revised: 30 Jan 2019
Date Written: January 10, 2019
Time-series momentum (TSM) refers to the predictability of the past 12-month return on the next one-month return, and is the focus of several recent influential studies. This paper shows, however, that asset-by-asset time-series regressions reveal little evidence of TSM, both in- and out-of-sample. While the t-statistic in a pooled regression appears large, it is not statistically reliable as it is less than the critical values of parametric and non-parametric bootstraps. From an investment perspective, the TSM strategy is profitable, but its performance is virtually the same as that of a similar strategy that is based on historical sample mean and does not require predictability. Overall, the evidence on TSM is weak, particularly for the large cross section of assets.
Keywords: Time-series momentum; Risk premium; Return predictability; Pooled regression
JEL Classification: G12, G14, G15, F37
Suggested Citation: Suggested Citation