The trend premium around the world: Evidence from the stock market

Hai Lin, Pengfei Liu and Cheng Zhang

International Review of Finance, 2023, vol. 23, issue 2, 317-358

Abstract: This paper studies the predictive power of the trend strategy in the international stock market. Using data from 49 markets, we find that a trend signal exploiting the short‐, intermediate‐, and long‐term price information can predict stock returns cross‐sectionally in the international market. The significance of the trend strategy is associated with market‐level characteristics such as macroeconomic conditions, culture, and the information environment. The trend premium is more pronounced in markets with a more advanced macroeconomic status, a higher level of information uncertainty and individualism, and better accessibility to foreign investors. Nevertheless, the trend strategy only outperforms the momentum strategy in a relatively short horizon.

Date: 2023
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https://doi.org/10.1111/irfi.12400

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