Momentum turning points

Christian L. Goulding, Campbell R. Harvey and Michele G. Mazzoleni

Journal of Financial Economics, 2023, vol. 149, issue 3, 378-406

Abstract: We use slow and fast time-series momentum to characterize four stock market cycles—Bull, Correction, Bear, and Rebound. The steep market declines of Bears concentrate in high-risk states, yet predict negative expected returns, which is difficult to rationalize by most models of time-varying risk premia. Using a model to analyze slow and fast momentum strategies, we estimate both relatively high mean persistence and realization noise in U.S. stock market returns. Intermediate-speed momentum portfolios, formed by blending slow and fast momentum strategies, translate predictive information in market cycles into positive unconditional alpha, for which we propose a novel decomposition.

Keywords: Time-series momentum; Turning points; Volatility timing; Market timing; Trend following; Momentum speed (search for similar items in EconPapers)
JEL-codes: G12 G13 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:149:y:2023:i:3:p:378-406

DOI: 10.1016/j.jfineco.2023.05.007

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