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Asymmetry, tail risk and time series momentum

Liu, Z., Lu, S. and Wang, S. ORCID: https://orcid.org/0000-0003-2113-5521 (2021) Asymmetry, tail risk and time series momentum. International Review of Financial Analysis, 78. 101938. ISSN 1057-5219

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To link to this item DOI: 10.1016/j.irfa.2021.101938

Abstract/Summary

In this paper, we investigate how to improve the time series momentum strategy by using partial moments. We find that reversals of time series momentum can be partly predicted by tail-distributed upper and lower partial moments derived from daily returns of commodity futures. Based on such information, we propose rule-based approaches to improve the trading signals suggested by the time series momentum strategy. The empirical results based on Chinese commodity futures document statistically significant improvements of the Sharpe ratio in the out-of-sample period. These improvements are robust to different look-back windows.

Item Type:Article
Refereed:Yes
Divisions:Arts, Humanities and Social Science > School of Politics, Economics and International Relations > Economics
ID Code:100824
Publisher:Elsevier

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