Optimal Time Series Momentum

Xuezhong (Tony) He, Kai Li and Youwei Li

No 353, Research Paper Series from Quantitative Finance Research Centre, University of Technology, Sydney

Abstract: We develop a continuous-time asset price model to capture the time series momentum documented recently. The underlying stochastic delay differential system facilitates the analysis of effects of different time horizons used by momentum trading. By studying an optimal asset allocation problem, we find that the performance of time series momentum strategy can be significantly improved by combining with market fundamentals and timing opportunity with respect to market trend and volatility. Furthermore, the results also hold for different time horizons, the out-of-sample tests and with short-sale constraints. The outperformance of the optimal strategy is immune to market states, investor sentiment and market volatility.

Keywords: momentum, reversal; portfolio choice; optimality; profitability (search for similar items in EconPapers)
JEL-codes: E32 G12 G14 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2015-01-01
New Economics Papers: this item is included in nep-mac and nep-ore
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.uts.edu.au/sites/default/files/qfr-archive-03/QFR-rp353.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:uts:rpaper:353

Access Statistics for this paper

More papers in Research Paper Series from Quantitative Finance Research Centre, University of Technology, Sydney PO Box 123, Broadway, NSW 2007, Australia. Contact information at EDIRC.
Bibliographic data for series maintained by Duncan Ford ().