Cross-asset signals and time series momentum

Aleksi Pitkäjärvi, Matti Suominen and Lauri Vaittinen

Journal of Financial Economics, 2020, vol. 136, issue 1, 63-85

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.

Keywords: Asset pricing; Time series momentum; Cross-asset predictability; Slow-moving capital; International financial markets (search for similar items in EconPapers)
JEL-codes: G12 G15 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (21)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:136:y:2020:i:1:p:63-85

DOI: 10.1016/j.jfineco.2019.02.011

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