Cross-momentum strategies in the equity futures and currency markets

Yasuhiro Iwanaga and Ryuta Sakemoto

Journal of International Money and Finance, 2024, vol. 148, issue C

Abstract: This study focuses on two of the most liquid assets—currencies and international equity futures indices—and investigates whether cross-momentum enhances momentum portfolios. We uncover that a combination of equity futures and currency portfolios sorted by cross-momentum outperforms a combination of those sorted by normal-momentum. The change in the Sharpe ratio is 0.32 and the economic gain based on the performance fee measure differs by 4.11% per annum. Moreover, we observe that the cross-momentum strategy is more strongly associated with commodity exporting countries. This stems from the positive relationship between equity futures and macroeconomic conditions for commodity exporting countries.

Keywords: Currency portfolio; International equity portfolio; Momentum; Commodity currencies (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:148:y:2024:i:c:s0261560624001578

DOI: 10.1016/j.jimonfin.2024.103170

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