Short-Term Trend: A Jewel Hidden in Daily Returns

Journal of Portfolio Management, Forthcoming

Posted: 17 Mar 2020

See all articles by Marat Molyboga

Marat Molyboga

Efficient Capital Management, LLC

Larry E Swedroe

affiliation not provided to SSRN

Junkai Qian

Illinois Institute of Technology, Stuart School of Business

Date Written: February 21, 2020

Abstract

This paper examines the performance of time-series momentum strategies using daily returns for 78 futures markets across four major asset classes between January 1985 and December 2017. We find that the 252-day, 63-day and 21-day momentum strategies perform similarly to the previously documented 12-month, 3-month and 1-month momentum strategies, respectively. The performance is stronger with volatility-based position sizing, robust to implementation considerations such as a one day gap between signal generation and execution, and persistent across asset classes and sub-periods. We introduce a shorter duration momentum strategy with weekly rebalancing frequency, which cannot be replicated using monthly returns. We find that the short-term strategy is a strong diversifier to the longer-term strategies, but the benefit may be reduced, or even completely offset, if the quality of trade execution is poor. We also find that the positive contribution of short-term momentum is driven by its superior diversifying characteristics rather than due to the rebalancing frequency effect.

Keywords: time-series momentum, futures markets, trend following, short-term momentum

JEL Classification: G11, G12, G13, G15

Suggested Citation

Molyboga, Marat and Swedroe, Larry E and Qian, Junkai, Short-Term Trend: A Jewel Hidden in Daily Returns (February 21, 2020). Journal of Portfolio Management, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3542364

Marat Molyboga (Contact Author)

Efficient Capital Management, LLC ( email )

4355 Weaver Parkway
Warrenville, IL 60555
United States
6306576842 (Phone)

Larry E Swedroe

affiliation not provided to SSRN

Junkai Qian

Illinois Institute of Technology, Stuart School of Business ( email )

10 West 35th Street, 18th Floor
Chicago, IL 60616
United States

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