Time-series residual momentum strategies

Saejoon Kim

Applied Economics, 2022, vol. 54, issue 5, 580-594

Abstract: We find that the conventional time-series momentum strategy can be revised in two ways to deliver enhanced excess return performance that are reminiscent of the advancements for the cross-sectional momentum strategy. First, we explore the applicability of the residual return for time-series momentum and find that it opens a door for constructing new improved time-series momentum strategies. Second, we examine the pertinence of the auto-covariance property of returns, which is the defining characteristic of time-series momentum, for asset allocation which has almost universally been identified with the equal-weighted one in the literature. We discover that consistent and persistent performance enhancements are earned by both approaches for the industry portfolios.

Date: 2022
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DOI: 10.1080/00036846.2021.1967862

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