TY - JOUR
T1 - Time series momentum
T2 - Is it there?
AU - Huang, Dashan
AU - Li, Jiangyuan
AU - Wang, Liyao
AU - Zhou, Guofu
N1 - Funding Information:
We are grateful to William Schwert (the editor) and an anonymous referee for very insightful and helpful comments that significantly improved the paper. We also thank Lauren H. Cohen, Eugene Fama, Amit Goyal, Wesley R. Gray, Campbell R. Harvey, Johan Hombert, Narasimhan Jegadeesh, Raymond Kan, Yan Liu, Roger Loh, David Rapach, Yiuman Tse, John Wald, Dacheng Xiu, and seminar and conference participants at Baruch College, Rutgers University, Washington University in St. Louis, 2017 Conference on Financial Predictability and Data Science, 2017 Workshop on Advanced Econometrics at the University of Kansas, and 2018 National Bureau of Economic Research-National Science Foundation (NBER-NSF) Time Series Conference for valuable comments. Dashan Huang acknowledges that this study was partially funded at the Singapore Management University through a research grant (C207MSS17B009) from the Ministry of Education Academic Research Fund Tier 1.
Publisher Copyright:
© 2019 Elsevier B.V.
PY - 2020/3
Y1 - 2020/3
N2 - 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.
AB - 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.
KW - Pooled regression
KW - Return predictability
KW - Risk premium
KW - Time series momentum
UR - http://www.scopus.com/inward/record.url?scp=85070714260&partnerID=8YFLogxK
U2 - 10.1016/j.jfineco.2019.08.004
DO - 10.1016/j.jfineco.2019.08.004
M3 - Article
AN - SCOPUS:85070714260
SN - 0304-405X
VL - 135
SP - 774
EP - 794
JO - Journal of Financial Economics
JF - Journal of Financial Economics
IS - 3
ER -