Improving Time-Series Momentum Strategies: The Role of Trading Signals and Volatility Estimators

Akindynos-Nikolaos Balta, Robert Kosowski: Constructing a time-series momentum strategy involves the volatility-adjusted aggregation of univariate strategies and therefore relies heavily on the efficiency of the volatility estimator and on the quality of the momentum trading signal.

Author(s):

Akindynos-Nikolaos Balta

Imperial College Business School

Robert Kosowski

EDHEC Business School

Using a dataset with intra-day quotes of 12 futures contracts from November 1999 to October 2009, we investigate these dependencies and their relation to time-series momentum profitability and reach a number of novel findings. Momentum trading signals generated by fitting a linear trend on the asset price path maximise the out-of-sample performance while minimising the portfolio turnover, hence dominating the ordinary momentum trading signal in literature, the sign of past return. Regarding the volatilityadjusted aggregation of univariate strategies, the Yang-Zhang range estimator constitutes the optimal choice for volatility estimation in terms of maximising efficiency and minimising the bias and the ex-post portfolio turnover.
Pdf
Improving Time-Series Momentum Strategies: The Role of Trading Signals and Volat...
(-1.00 B)
Type: Working paper
Date: le 06/08/2012
Extra information : For more information, please contact EDHEC Research and Development Department [ research@drd.edhec.edu ]
Research Cluster : Finance

See Also

Nikolaos Tessaromatis speaking on factor investing at the 8th Wealth Management Forum
News
- 12-11-2018
Nikos Tessaromatis, Professor of Finance, EDHEC Business School and Member, EDHEC-Risk...
A Reinterpretation of the Optimal Demand for Risky Assets in Fund Separation Theorems - EDHEC-Risk Institute research article in Management Science
News
- 12-11-2018
We are pleased to enclose an EDHEC-Risk Institute research article published in the...
OTHERWISE#7 : NEW WAYS FOR ECONOMY AND BUSINESS
News
- 09-11-2018
Artificial Intelligence at the heart of Otherwise #7: « Our business school’s digital...
EDHEC Business school joins global alliance to revolutionize online education and flexible learning
News
- 02-11-2018
EDHEC has joined a group of five leading business schools to launch a new digital...