Asymmetry, tail risk and time series momentum

Zhenya Liu, Shanglin Lu and Shixuan Wang

International Review of Financial Analysis, 2021, vol. 78, issue C

Abstract: 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.

Keywords: Commodity futures; Time series momentum; Momentum reversal; Partial moments (search for similar items in EconPapers)
JEL-codes: G13 G17 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:78:y:2021:i:c:s1057521921002581

DOI: 10.1016/j.irfa.2021.101938

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