Time-Series Momentum: Is It There?

61 Pages Posted: 6 May 2018 Last revised: 6 Oct 2020

See all articles by Dashan Huang

Dashan Huang

Singapore Management University - Lee Kong Chian School of Business

Jiangyuan Li

Shanghai University of Finance and Economics

Liyao Wang

Hong Kong Baptist University (HKBU) - Department of Finance and Decision Sciences

Guofu Zhou

Washington University in St. Louis - John M. Olin Business School

Date Written: January 10, 2019

Abstract

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 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 nonparametric 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

Huang, Dashan and Li, Jiangyuan and Wang, Liyao and Zhou, Guofu, Time-Series Momentum: Is It There? (January 10, 2019). Journal of Financial Economics 135, 774-794, 2020, Available at SSRN: https://ssrn.com/abstract=3165284 or http://dx.doi.org/10.2139/ssrn.3165284

Dashan Huang

Singapore Management University - Lee Kong Chian School of Business ( email )

50 Stamford Road
Singapore, 178899
Singapore

HOME PAGE: http://dashanhuang.weebly.com/

Jiangyuan Li

Shanghai University of Finance and Economics ( email )

777 Guoding Road
Shanghai, Shanghai 200433
China

Liyao Wang

Hong Kong Baptist University (HKBU) - Department of Finance and Decision Sciences ( email )

Hong Kong
Hong Kong

Guofu Zhou (Contact Author)

Washington University in St. Louis - John M. Olin Business School ( email )

Washington University
Campus Box 1133
St. Louis, MO 63130-4899
United States
314-935-6384 (Phone)
314-658-6359 (Fax)

HOME PAGE: http://apps.olin.wustl.edu/faculty/zhou/

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