Profitability of time series momentum

He, XZ; Li, K

Profitability of time series momentum

He, XZ

Li, K

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Publication Type:: Journal Article
Citation:: Journal of Banking and Finance, 2015, 53 pp. 140 - 157
Issue Date:: 2015-04-01

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Field	Value	Language
dc.contributor.author	He, XZ https://orcid.org/0000-0003-1446-9996	en_US
dc.contributor.author	Li, K https://orcid.org/0000-0003-1620-8829	en_US
dc.date.available	2020-05-25T19:18:11Z
dc.date.issued	2015-04-01	en_US
dc.identifier.citation	Journal of Banking and Finance, 2015, 53 pp. 140 - 157	en_US
dc.identifier.issn	0378-4266	en_US
dc.identifier.uri	http://hdl.handle.net/10453/121966
dc.description.abstract	© 2015 Elsevier B.V. We propose a continuous-time heterogeneous agent model consisting of fundamental, momentum, and contrarian traders to explain the significant time series momentum. We show that the performance of momentum strategy is determined by both time horizon and the market dominance of momentum traders. Specifically, when momentum traders are more active in the market, momentum strategies with short (long) time horizons stabilize (destabilize) the market, and meanwhile the market under-reacts (over-reacts) in short-run (long-run). This provides profit opportunity for time series momentum strategies with short horizons and reversal with long horizons. When momentum traders are less active in the market, they always lose. The results provide an insight into the profitability of time series momentum documented in recent empirical studies.	en_US
dc.relation	http://purl.org/au-research/grants/arc/DP130103210
dc.relation.ispartof	Journal of Banking and Finance	en_US
dc.relation.isbasedon	10.1016/j.jbankfin.2014.12.017	en_US
dc.subject.classification	Finance	en_US
dc.title	Profitability of time series momentum	en_US
dc.type	Journal Article
utslib.citation.volume	53	en_US
utslib.for	150201 Finance	en_US
utslib.for	0102 Applied Mathematics	en_US
utslib.for	1401 Economic Theory	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Finance Discipline
pubs.organisational-group	/University of Technology Sydney/Strength - QFRC - Quantitative Finance Research Centre
utslib.copyright.status	open_access
pubs.publication-status	Published	en_US
pubs.volume	53	en_US

Abstract:

© 2015 Elsevier B.V. We propose a continuous-time heterogeneous agent model consisting of fundamental, momentum, and contrarian traders to explain the significant time series momentum. We show that the performance of momentum strategy is determined by both time horizon and the market dominance of momentum traders. Specifically, when momentum traders are more active in the market, momentum strategies with short (long) time horizons stabilize (destabilize) the market, and meanwhile the market under-reacts (over-reacts) in short-run (long-run). This provides profit opportunity for time series momentum strategies with short horizons and reversal with long horizons. When momentum traders are less active in the market, they always lose. The results provide an insight into the profitability of time series momentum documented in recent empirical studies.

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http://hdl.handle.net/10453/121966