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Journal of Banking & Finance Vol. 124 2021

Return signal momentum

Fotis Papailias1,2; Jiadong Liu3; Dimitrios D. Thomakos4,5,6

1 King's College London · 2 King's College School · 3 Queen's University Belfast · 4 University of Peloponnese · 5 Athens University of Economics and Business · 6 National and Kapodistrian University of Athens

open access

Abstract

A new type of momentum based on the signs of past returns is introduced. This momentum is driven primarily by sign dependence, which is positively related to average return and negatively related to return volatility. An empirical application using a universe of commodity and financial futures offers supporting evidence for the existence of such momentum. Investment strategies based on return signal momentum result in higher returns and Sharpe ratios and lower drawdown relative to time series momentum and other benchmark strategies. Overall, return signal momentum can benefit investors as an effective strategy for speculation and hedging.

DOI
10.1016/j.jbankfin.2021.106063
Volume
124
Pages
106063
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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