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.
Auteur(s) :
Imperial College Business School
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.
| Type : | Working paper |
|---|---|
| Date : | le 06/08/2012 |
| Pôle de recherche | Finance |
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