Improving market timing of time series momentum in the Chinese stock market

Yafeng Qin (), Guoyao Pan and Min Bai ()

Applied Economics, 2020, vol. 52, issue 43, 4711-4725

Abstract: This paper is the first study to present firm-level evidence that the time-series momentum (TSMOM) strategies with look-back-period k of 10 to 200 days outperform the buy-and-hold strategy (BH) on individual stocks in the Chinese stock market. We document that the optimal k* generating the best performance is different across assets and varies over time. We hence propose a model to predict the asset-specific and time-dependent k*, and examine the performance of the TSMOM strategies with the predicted k*. Our analysis shows that using the time-varying predicted k* substantially improves the predictability of the TSMOM strategies. Our new model and findings shed the light on trading strategy for both academia and applied investment practitioners.

Date: 2020
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DOI: 10.1080/00036846.2020.1740160

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