State-dependent Momentum in International Stock Markets

Dirk Baur () and Thomas Dimpfl

No 169, Working Paper Series from Finance Discipline Group, UTS Business School, University of Technology, Sydney

Abstract: We estimate quantile autoregression (QAR) models to analyze variations in the autoregressive coefficients of 55 international stock index returns and demonstrate that it is important to allow the autoregressive parameters to vary with quantiles. The empirical results identify distinctively different patterns of autoregressive coefficients in the lower, central and upper quantiles of the distribution across all countries. More specifically, the study suggests that investors follow momentum strategies in lower quantiles or "bad states". We also demonstrate that the quantile autoregression estimates can be used to test for asymmetric responses of the volatility.

Keywords: quantile autoregression (QAR); return autocorrelation; investor behaviour; momentum; underreaction; financial crisis (search for similar items in EconPapers)
Pages: 37
Date: 2012-08-01
New Economics Papers: this item is included in nep-fmk
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Citations: View citations in EconPapers (1)

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