Time Series Momentum and Reversal: Intraday Information From Realized Semivariance

Abstract

The presence of time series momentum has been widely documented in financial markets across asset classes and countries. In this study, we find a predictable pattern of the realized semivariance estimators for the returns of commodity futures, particularly during the reversals of time series momentum. Based on this finding, we propose a rule-based time series momentum strategy that has a statistically significant higher Sharpe ratio compared to the benchmark of the original time series momentum strategy in the out-of-sample data. The results are robust to different subsamples, lookback windows, volatility scaling, execution lag, and transaction cost.

Keywords: Commodity Futures Pricing, Time Series Momentum, Momentum Reversal, Realized Semivariance, High-frequency Data

JEL Classification: G12, G17