Cross-asset signals and time series momentum

Research output: Contribution to journalArticleScientificpeer-review

Researchers

Research units

  • Mandatum Life Insurance Company Limited

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.

Details

Original languageEnglish
Number of pages23
JournalJournal of Financial Economics
Publication statusE-pub ahead of print - 11 Sep 2019
MoE publication typeA1 Journal article-refereed

    Research areas

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

ID: 37222870