The Trend Premium Around the World: Evidence from the Stock Market

52 Pages Posted: 26 May 2020

See all articles by Hai Lin

Hai Lin

Victoria University of Wellington - School of Economics & Finance

Pengfei Liu

Victoria University of Wellington

Cheng Zhang

Victoria University of Wellington

Date Written: April 28, 2020

Abstract

This paper studies the predictive power of the trend strategy in the international stock market. Using data from 49 markets, we find that a trend signal exploiting the short-, intermediate-, and long-term price information can predict stock returns cross-sectionally in the international market. The significance of the trend strategy is associated with market-level characteristics such as macroeconomic conditions, culture, and the information environment. The trend premium is more pronounced in markets with a more advanced macroeconomic status, a higher level of information uncertainty and individualism, and better accessibility to foreign investors. Nevertheless, the trend strategy only outperforms the momentum strategy in a relatively short horizon.

Keywords: Trend premium; Momentum; Information uncertainty; International

JEL Classification: G12; G14

Suggested Citation

Lin, Hai and Liu, Pengfei and Zhang, Cheng, The Trend Premium Around the World: Evidence from the Stock Market (April 28, 2020). Available at SSRN: https://ssrn.com/abstract=3587342 or http://dx.doi.org/10.2139/ssrn.3587342

Hai Lin (Contact Author)

Victoria University of Wellington - School of Economics & Finance ( email )

P.O. Box 600
Wellington 6001
New Zealand

Pengfei Liu

Victoria University of Wellington ( email )

P.O. Box 600
Wellington, 6140
New Zealand

Cheng Zhang

Victoria University of Wellington ( email )

P.O. Box 600
Wellington, 6140
New Zealand

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