Cross-Sectional and Time-Series Momentum Returns and Market States

Cheema, Muhammad A. and Nartea, Gilbert V and Man, Yimei (2017): Cross-Sectional and Time-Series Momentum Returns and Market States.

Abstract

Recent evidence on momentum returns shows that the time-series (TS) strategy outperforms the cross-sectional (CS) strategy. We present new evidence that this happens only when the market continues in the same state, UP or DOWN. In fact, we find that the TS strategy underperforms the CS strategy when the market transitions to a different state. Our results also show that the difference in momentum returns between TS and CS strategies is related to both the net long and net short positions of the TS strategy.

• Item Type: MPRA Paper
• Language: English
• Keywords: momentum returns, cross-sectional, time-series, market states
• Subjects: G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions; G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates; G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency ; Event Studies ; Insider Trading

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