Cross-asset signals and time series momentum

Aleksi Pitkäjärvi, Matti Suominen*, Lauri Vaittinen

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

Abstract

We document a new phenomenon in bond and equity markets that we call cross-asset time series momentum. Using data from 20 countries, we show that past bond market returns are positive predictors of future equity market returns and past equity market returns are negative predictors of future bond market returns. We use this predictability to construct a diversified cross-asset time series momentum portfolio that yields a Sharpe ratio 45% higher than a standard time series momentum portfolio. We present evidence that time series momentum and cross-asset time series momentum are driven by slow-moving capital in bond and equity markets.

Original languageEnglish
Pages (from-to)63-85
JournalJournal of Financial Economics
Volume136
Issue number1
Early online date11 Sep 2019
DOIs
Publication statusPublished - Apr 2020
MoE publication typeA1 Journal article-refereed

Keywords

  • Asset pricing
  • Cross-asset predictability
  • International financial markets
  • Slow-moving capital
  • Time series momentum

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