Dual Momentum on Individual Stocks. Wow.
Hot off the press and haven’t had time to reverse engineer and verify, but this is pretty interesting stuff at first glance.
This study documents the significant profitability of “time-series momentum” strategies in individual stocks in the US markets from 1927 to 2014 and in international markets since 1975. Unlike cross-sectional momentum, time-series stock momentum performs well following both up- and down-market states, and it does not suffer from January losses and market crashes. An easily formed dual-momentum strategy, combining time-series and cross-sectional momentum, generates striking returns of 1.88% per month. We test both risk based and behavioral models for the existence and durability of time-series momentum and suggest the latter offers unique insights into its continuing factor dominance.
A picture is worth a 1,000 words:
h.t., A. Miller @ http://www.miller-financial.com/ for sending our way!
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Definitions of common statistics used in our analysis are available here (towards the bottom)