Empirical evidence on the profitability of momentum trading strategies using ETFs

2020 ◽  
Vol 46 (11) ◽  
pp. 1321-1341
Author(s):  
Susana Yu ◽  
Gwendolyn Webb
Keyword(s):  
Financial Crisis ◽  
Empirical Evidence ◽  
Null Hypothesis ◽  
Trading Strategy ◽  
High Price ◽  
Momentum Strategy ◽  
Content Type ◽  
Relative Ease ◽  
Financial Crisis Of 2008 ◽  
Momentum Trading

PurposeWe extend empirical evidence on the profitability of momentum trading to the realm of plain-equity ETFs.Design/methodology/approachWe employ several ranking measures used in prior research, and for each we apply a traditional ranking based on total return, and a variation based only on the capital gain/loss portion of return.FindingsWhile we find that past momentum is not a strong predictor of future performance in our overall sample period, 2007 to June 2018, we find that the percent off 52-week high price results in positive performance in the recovery years following the financial crisis of 2008–2009.Research limitations/implicationsOur study is limited by the availability of ETF experience and data, and our test period covers just 2007 through June 2018. This period includes the financial crisis of 2008–2009, which previous research finding is associated with the momentum strategy's loss of profitability. When we exclude that period, we find evidence of a profitable momentum strategy based on the measure of percent off 52-week high price, enabling us to reject the null hypothesis that the momentum trading strategy is no longer profitable.Practical implicationsIt is profitable based on both return measures used in the rankings. Our finding of a profitable momentum trading strategy suggests that the null hypothesis that the momentum strategy is no longer profitable can be rejected.Originality/valueWhile perhaps not so strong as to reject the efficient markets hypothesis fully, our empirical findings are more consistent with a behavioral explanation and a market inefficiency. In view of the relative ease and low transactional costs of trading in ETFs, the markets have yet another opportunity to recognize an apparent mispricing and employ arbitrage based on it. To the extent that the relative ease of trading in ETFs makes momentum strategies easier to employ, the momentum anomaly might still be expected to disappear in an efficient market.

scholarly journals Do momentum and reversal strategies work in commodity futures? A comprehensive study

2020 ◽  
Vol 12 (4) ◽  
pp. 375-409 ◽  
Author(s):  
Hanxiong Zhang ◽  
Andrew Urquhart
Keyword(s):  
Futures Market ◽  
Trading Strategy ◽  
Commodity Futures ◽  
High Momentum ◽  
Pairs Trading ◽  
Momentum Strategy ◽  
Partial Explanation ◽  
Content Type ◽  
Momentum Profits ◽  
Significant Reversal

PurposeMotivated by the debate on the patterns and sources of commodity futures returns, this paper investigates the performance of three investment trading strategies, namely, the momentum strategy of Jegadeesh and Titman (1993), the 52-week high momentum strategy of George and Hwang (2004) and the pairs trading strategy of Gatev et al. (2006) in the commodity futures market.Design/methodology/approachThe three strategies are those given by Jegadeesh and Titman (1993), George and Hwang (2004) and Gatev et al. (2006), respectively.FindingsThe authors find that there is no significant reversal profit across 189 formation-holding windows for all the three strategies. However, there are statistical and economically significant momentum profits, and the profitability increases with the rising of formation-holding periods. Momentum returns are quite sensitive to market conditions but the crash of momentum returns is partly predictable. Return seasonality, risk and herding also provide partial explanation of the momentum profits.Originality/valueThe authors are the first to compare the performances of the pairs trading strategy of Gatev et al. (2006), the conventional momentum of Jegadeesh and Titman (1993), and the 52-week high momentum of George and Hwang (2004) under 189 formation-holding windows. Also, the authors are the first to investigate the association between herding behaviour and momentum returns in the commodity futures market.

Exchange rate volatility and exports: a panel data analysis

2016 ◽  
Vol 43 (2) ◽  
pp. 203-221 ◽  
Author(s):  
Flavio Vilela Vieira ◽  
Ronald MacDonald
Keyword(s):  
Exchange Rate ◽  
Financial Crisis ◽  
Emerging Economies ◽  
Exchange Rate Volatility ◽  
Content Type ◽  
International Financial Crisis ◽  
Export Volume ◽  
Oil Export ◽  
Financial Crisis Of 2008 ◽  
The Impact

Purpose – The purpose of this paper is to empirically investigate the role of real effective exchange rate (REER) volatility on export volume and also to address the impact of the international financial crisis of 2008. Design/methodology/approach – The empirical methodology is based on System GMM estimation for a set of 106 countries for the period of 2000-2011. Findings – For the complete sample of countries and for a set of developing/emerging economies, there is evidence that an increase (decrease) in REER volatility reduces (increases) export volume. The results are not robust once the oil export countries are removed from the sample. The estimated coefficients for the financial crisis dummy are positive and statistically significant, indicating that export volume were 0.14 percent higher after the financial crisis of 2008 compared to the previous period (2000-2007). There is also evidence that the export volume is price (REER) and income (trade weighted) inelastic. Research limitations/implications – The empirical results are valid for the complete set of countries and for developing and emerging economies when including the oil export countries, suggesting that countries should reduce exchange rate volatility in order to foster their export volume and that oil export countries have an important role on these results. Practical implications – The paper suggests that policymakers should adopt different policies to minimize exchange rate volatility if they seek to increase export volume. The international financial crisis had a significant impact on export volume in all estimated models regardless of the set of countries used. Originality/value – One of the main novelties of this work is that it deals with possible endogeneity using GMM estimators and addresses the issue of instrument proliferation, which is not a common feature of previous empirical studies on exchange rate volatility and trade flows. Another original aspect of the research is the construction of trade weighted variables for foreign income and REER based on the major 20 export partners for each country used in the panel data estimation. The work also incorporates the years following the international financial crisis of 2008, which is an additional empirical novelty, in order to address the impact of the international financial crisis on the export volume.

Sport in Europe’s era of austerity: crisis or adaptation?

2017 ◽  
Vol 37 (1/2) ◽  
pp. 123-130 ◽  
Author(s):  
Ken Roberts
Keyword(s):  
Public Sector ◽  
Financial Crisis ◽  
Design Methodology ◽  
Review Of Literature ◽  
Consumer Spending ◽  
Historical Trends ◽  
Content Type ◽  
Financial Crisis Of 2008 ◽  
Practical Implications

Purpose The purpose of this paper is to assess whether European sport has been damaged or adapted during the austerity in public sector and consumer spending that has followed the financial crisis of 2008-2009. Design/methodology/approach Review of literature and data. Findings Sport has adapted successfully. Research limitations/implications The overall conclusions will not apply to every sport in every country. Practical implications Sport flourishes when it adapts to historical trends. Originality/value Updates all previous reviews.

The revenue persistence of US accounting firms: impacts of SOX and financial crisis

2019 ◽  
Vol 31 (3) ◽  
pp. 523-548
Author(s):  
KiKyung Song ◽  
Eunyoung Whang
Keyword(s):  
Financial Crisis ◽  
Design Methodology ◽  
Market Conditions ◽  
Accounting Firms ◽  
Content Type ◽  
Advisory Services ◽  
Sarbanes Oxley ◽  
Financial Crisis Of 2008 ◽  
The Impact ◽  
Management Advisory

Purpose Typical accounting firms offer three types of accounting services to their clients: accounting and auditing (AA), tax (TAX) and management advisory services (MAS). Each accounting service has a different revenue persistence. Moreover, revenue persistence is affected by exogenous events such as new regulations (e.g. Sarbanes-Oxley Act [SOX] in 2002) and market conditions (e.g. the financial crisis of 2008). This paper aims to examine the revenue persistence of accounting services and how it is affected by SOX and the financial crisis. Design/methodology/approach Using 742 firm-year observations from 100 of the largest US accounting firms from 1999 to 2015, this paper examines whether revenue from AA, TAX and MAS has different degrees of persistence and how SOX and the financial crisis in 2008 change the revenue persistence of each accounting service. Findings This paper finds that MAS generates more persistent revenue than AA and TAX. SOX enhances the revenue persistence of MAS. The financial crisis makes revenue from AA less persistent than during the pre-financial crisis period. Originality/value This paper contributes to the understanding of the revenue persistence of accounting services and the impact of exogenous events such as SOX and the financial crisis of 2008.

scholarly journals Nonlinear effects of fiscal policy on national saving

2018 ◽  
Vol 25 (1) ◽  
pp. 2-14
Author(s):  
Duy-Tung Bui
Keyword(s):  
Fiscal Policy ◽  
Financial Crisis ◽  
Empirical Model ◽  
Tax Policy ◽  
Global Financial Crisis ◽  
Economic Recession ◽  
Generation Model ◽  
Content Type ◽  
Financial Crisis Of 2008 ◽  
The Global Financial Crisis

Purpose The purpose of this paper is to examine the impacts of fiscal policy, namely, net tax and government expenditure on national saving and its nonlinearity. The author first investigates whether the impacts of fiscal policy on national saving have changed after the global financial crisis of 2008. Then, the author tests the nonlinearity of the relationship by taking account of the economic cycle, namely, economic expansion (boom) and economic recession (bust). Design/methodology/approach The empirical model bases on a reduced-form equation with national saving as a dependent variable, lagged value of national saving, output gap and fiscal policy as independent variables. The two-step system GMM approach was employed to estimate the empirical model, using a panel of 23 emerging Asian economies in the period of 1990-2015. Findings The empirical results show that tax policy and expenditure policy follow the predictions of the overlapping generation model with finite horizon and the Keynesian view. The nonlinearity of fiscal policy is twofold. The conduct of fiscal policy in the period after 2008 seems effective, while the effect is insignificant in the period before 2008. Likewise, fiscal policy tends to have more significant effects in bust cycle. The effect of tax policy is increased during recession, while the effect of government spending is more pronounced during economic downturn. Originality/value The contributions of this paper are twofold. First, it is shown that fiscal policies in the region had more impacts on national saving after the global financial crisis of 2008. Second, the research confirms nonlinear impact of fiscal policy on saving behavior during economic recession and economic boom.

Destabilizing momentum trading and counterbalancing contrarian strategy by large trader groups

2019 ◽  
Vol 19 (1) ◽  
pp. 83-106
Author(s):  
Jang Hyung Cho ◽  
Robert Daigler ◽  
YoungHa Ki ◽  
Janis Zaima
Keyword(s):  
Futures Markets ◽  
Trading Strategies ◽  
Institutional Trading ◽  
Momentum Strategy ◽  
Content Type ◽  
Contrarian Strategy ◽  
Market Makers ◽  
Contrarian Strategies ◽  
Momentum Trading ◽  
Individual Traders

Purpose The purpose of this paper is to assess trading strategies adopted by each large trader group and examine their effects on the volatility in the interest rate futures markets. Design/methodology/approach The Grinblatt et al.'s (1995) measure of momentum strategy is used to estimate the degree momentum and contrarian strategies. Then, regression analysis is used to determine the effects of trading strategies on volatility. Findings Up until 2005, the trades by non-clearing member firms in the futures market were separated from institutional traders providing us the opportunity to study trading strategies adopted by large distinct trading groups and its effects on volatility in the futures markets. It is found that individual traders use momentum strategy, whereas market makers and institutional traders use contrarian strategy. Momentum strategy adopted by individual traders increases volatility whereas contrarian strategy dampens volatility. Moreover, it is found that institutional traders engage more actively in contrarian trading when individual traders cause excessive volatility. The two distinct trading groups were separately tracked prior to 2005 giving us a unique window to determine the effect of the traders that conduct momentum trading as opposed to the ones that are contrarian traders. After the reclassification, the institutional trading group exhibited weaker contrarian strategy which can be attributed to the inclusion of non-clearing firm traders. Originality/value This study documents the first empirical evidence that shows off-exchange futures trader group is not composed of only pure noise makers, but there are short-term forecasters in its group. The authors also show a unique finding that noises caused by off-exchange group is from momentum strategy that they use, whereas contrarian strategy is used by institutional trader lower volatility.

Geopolitical implications of China’s rise in Asia

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Romi Jain ◽  
Joseph Tse-Hei Lee
Keyword(s):  
Financial Crisis ◽  
Global Financial Crisis ◽  
Indian Subcontinent ◽  
World Order ◽  
Content Type ◽  
China’S Rise ◽  
The Usa ◽  
China's Rise ◽  
Financial Crisis Of 2008 ◽  
The Global Financial Crisis

Purpose This introductory essay historicizes the evolution of China’s geopolitical strategy from the Maoist era (1949–1976) to the present. It examines the Chinese strategic thinking in four spatial settings: Eurasia, maritime Southeast Asia, the Indian subcontinent and the wider Indo-Pacific region. The Chinese strategic concerns are comparable across these regions, but the ability to pursue security interests is contingent on many circumstantial factors. This study refers to some snapshots of the ongoing regional disputes to discuss the continuities and breakpoints in China’s strategic outreach in a multipolar world. Design/methodology/approach This study draws on the scholarly literature and policy papers to examine the interrelated forces that shape China’s rise to regional dominance: how Beijing has co-opted a series of global and regional crises for its rise to domination; how China, the USA and neighbouring countries have adjusted and adapted to a new changing international order; and how major powers in littoral and maritime Asia respond to an increasingly assertive Chinese state. Findings This study documents the combination of smart, soft and sharp power that China has deployed, since the global financial crisis of 2008, to enforce its dominance against the USA across the Pacific Rim and Eurasia. It argues that General Secretary of the Chinese Communist PartyXi Jinping initially launched the Belt and Road Initiative to respond to former US President Barak Obama’s policy of rebalancing Asia, and he has expanded these expansionary projects to counter US President Donald Trump’s “America First” doctrine, thereby asserting Chinese influence abroad and tightening control against discontented populations at home. Research limitations/implications Many Western policy analysts are wondering whether a rising China will be a “status quo” state or a revisionist state that attempts to challenge the existing world order. The lack of clarification from Beijing has prompted Washington to shift from a longstanding strategy of diplomatic engagement to that of geostrategic containment to balance against China. Originality/value The strategic goals of China in the early 21st century pertain to security reassurance, access to energy resources and national image building. Since the global financial crisis of 2008, China has become immensely confident of its own socio-economic accomplishments and scornful of what it perceives as an American conspiracy to undermine its rise to power. Following in the footsteps of the USA in the post-Second World War era, Japan in the 1980s and Taiwan in the 1990s, Beijing has used international commercial activities and business contracts to achieve specific political, strategic and diplomatic objectives.

Who were the winners and losers in the Financial Crisis of 2008: it depends

2014 ◽  
Vol 21 (4) ◽  
pp. 447-460 ◽  
Author(s):  
James Fisher ◽  
Jim Gilsinan ◽  
Muhammed Islam ◽  
Neil Seitz
Keyword(s):  
Financial Crisis ◽  
Chief Executive Officers ◽  
Complex Mixture ◽  
Chief Executive ◽  
Wall Street ◽  
Content Type ◽  
Financial Crisis Of 2008 ◽  
Executive Officers ◽  
Gains And Losses ◽  
Practical Implications

Purpose – This paper aims to address the question of who gained and who lost in the financial crisis of 2008. Design/methodology/approach – Gains and losses were identified by groups ranging from bankers to homeowners to taxpayers. Findings – Gains and losses are not neatly split by a main street/Wall street dichotomy. Major financial institutions and their chief executive officers made huge gains followed by bigger losses, a substantial portion of which were shared by taxpayers. Homeowners and taxpayers consistently lost. Workers and real estate developers experienced a mixture of gains and losses. Practical implications – Financial legislation is affected by questions of who won and who lost. The complex mixture of gains and losses must be fully grasped if winners and losers are an important consideration in the design of legislation. Originality/value – The detailed analysis and model of winners and losers provide important lessons for legislators and regulators in all countries.

Establishing credible rules for Fed emergency lending

2017 ◽  
Vol 9 (3) ◽  
pp. 260-267 ◽  
Author(s):  
Charles W. Calomiris ◽  
Douglas Holtz-Eakin ◽  
R. Glenn Hubbard ◽  
Allan H. Meltzer ◽  
Hal S. Scott
Keyword(s):  
Financial Crisis ◽  
Moral Hazard ◽  
Empirical Evidence ◽  
Financial Institutions ◽  
Federal Reserve ◽  
Design Methodology ◽  
Costs And Benefits ◽  
Content Type ◽  
Systemic Crises ◽  
Practical Implications

Purpose The purpose of this paper is to propose reforms that would establish a credible framework of rules to constrain and guide emergency lending by the Federal Reserve and by fiscal authorities during a future financial crisis. Design/methodology/approach The authors propose a set of five overarching rules, informed by history, empirical evidence and theory, which would serve as the foundation on which detailed legislation should be constructed. Findings The authors find that the current framework governing emergency lending – including reforms to Federal Reserve lending enacted after the recent crisis – is inadequate and not credible, and that their proposed framework would constitute a credible balancing of costs and benefits. Practical implications Adequate assistance to financial institutions would be provided in systemic crises but would be limited in its form, and by the process that would govern its provision. Originality/value This framework would serve as a basis for establishing effective rules that would be credible, and that would properly balance the moral-hazard costs of emergency lending against the gains from avoiding systemic collapse of the financial system.

scholarly journals Þekkingarmiðað lýðræði – þegar þekking lýðsins ræður

2016 ◽  
Vol 12 (2) ◽  
pp. 491
Author(s):  
Jón Ólafsson
Keyword(s):  
Decision Making ◽  
Financial Crisis ◽  
Empirical Evidence ◽  
Common Core ◽  
Democratic Governance ◽  
Public Consultation ◽  
Epistemic Democracy ◽  
Public Discussion ◽  
Financial Crisis Of 2008

During the democratic awakening in Iceland during and after the financial crisis of 2008 it was evident that different groups based their demands for more or deeper democracy on different conceptions of democracy. Yet their demands had a common core: more democracy meant greater public influence on policy- and decision-making. Thus public discussion insisted on a conception of democracy according to which public consultation is a necessary part of democratic governance. This paper discusses different kinds of consultation depending on the particular demands in each case with particular emphasis on epistemic democracy. I argue that even though it can hardly be said that epistemic democracy is based on much empirical evidence yet, its approach is the most promising way to think about future democratic.

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