Time series momentum in the US stock market: Empirical evidence and theoretical analysis
Peer reviewed, Journal article
Published version
Permanent lenke
https://hdl.handle.net/11250/3031165Utgivelsesdato
2022Metadata
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Originalversjon
Zakamulin, V & Giner, J. (2022). Time series momentum in the US stock market: Empirical evidence and theoretical analysis. International Review of Financial Analysis, 82, 1-16. https://doi.org/10.1016/j.irfa.2022.102173Sammendrag
There is much controversy in the academic literature on the presence of short-term trends in financial markets and the trend-following strategy’s profitability. We restrict our attention to studying the time series momentum in the S&P Composite stock price index. Our contributions are both empirical and theoretical. On the empirical side, we present compelling evidence of the presence of short-term momentum. For the first time, we suppose that the returns follow a -order autoregressive process and evaluate this process’s parameters. On the theoretical side, we develop a tractable theoretical model that contributes to our fundamental understanding of the trend-following strategy’s risk, return, and performance. Using our model, we also estimate the power of statistical tests on the trend-following strategy’s profitability and find that these tests suffer from the low power problem.