Time-Series Momentum in a Small European Stock Market: Evidence from a New Historical Financial Dataset

• Type: Article in International Scientific Journal
• Date: 2023

Authors

Lobao, J (Author) FEP; Ana Rosário (Author) FEP

Journal

Title: Scientific Annals of Economics and Business

Vol. 70

Pages: 335-352

ISSN: 2501-1960

Publisher: Alexandru Ioan Cuza University of Iasi

Indexing

ISI Web of Knowledge - 0 Citations

Scopus

DOAJ

Econlit

Other information

Authenticus ID: P-00Z-3CY

DOI: 10.47743/saeb-2023-0021

Abstract (EN): In this paper, we examine the Portuguese stock market for indication of time-series momentum effects using a new historical financial dataset that covers about 120 years of data. We find strong time-series momentum effects that cannot be explained by conventional risk factors. The positive return continuation seems to last for a period of 12 months, being heavily concentrated at the first month. At longer investment horizons, returns tend to mean-revert. The market exhibited significant time-series momentum for all look-back and holding periods of 12 months or less. A strategy with a 1-month look -back period and a 12-month holding period is shown to be the most profitable yielding a Sharpe ratio roughly 5.4 times that generated by a passive strategy. Time-series momentum strategies tend to perform best during extreme up-market periods and deliver the worst returns during down markets. This suggests that the strategy may not offer significant diversification benefits. Our findings add to the evidence that time-series momentum effects are not a product of data mining and are difficult to reconcile with the assertion that stock markets follow a random walk.

Language: English

Type (Professor's evaluation): Scientific

No. of pages: 18