Momentum Turning Points

91 Pages Posted: 5 Dec 2019 Last revised: 5 Aug 2022

See all articles by Christian L. Goulding

Christian L. Goulding

Research Affiliates, LLC

Campbell R. Harvey

Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER)

Michele Mazzoleni

STRS Ohio

Date Written: August 4, 2022

Abstract

Turning points are the Achilles' heel of time-series momentum portfolios. Slow signals fail to react quickly to changes in trend while fast signals are often false alarms. We analyze how momentum portfolios of various intermediate speeds, formed by blending slow and fast strategies, handle turning points. We find that the intersection of slow and fast signal directions possesses predictive information, including predictably negative returns when both signals are negative. We propose a novel decomposition of momentum strategy alpha, highlighting the role of volatility timing; and a mean-variance optimal dynamic speed-selection strategy with efficient out-of-sample performance across international equity markets.

Journal of Financial Economics, forthcoming.

Keywords: time-series momentum, volatility timing, market timing, asset pricing, trend following, turning points, momentum speed, mean reversion, behavioral finance

JEL Classification: G12, G13

Suggested Citation

Goulding, Christian L. and Harvey, Campbell R. and Mazzoleni, Michele, Momentum Turning Points (August 4, 2022). Available at SSRN: https://ssrn.com/abstract=3489539 or http://dx.doi.org/10.2139/ssrn.3489539

Christian L. Goulding

Research Affiliates, LLC ( email )

620 Newport Center Dr
Suite 900
Newport Beach, CA 92660
United States

Campbell R. Harvey (Contact Author)

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-7768 (Phone)

HOME PAGE: http://www.duke.edu/~charvey

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Michele Mazzoleni

STRS Ohio ( email )

OH
United States

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