The Enduring Effect of Time-Series Momentum on Stock Returns Over Nearly 100-Years

Ian D’Souza

Research

53 Pages

The authors examine whether time-series momentum in stocks has persisted across nearly 100 years, challenging efficient market assumptions. The paper finds momentum worked in both bull and bear markets, while a combined “dual momentum” strategy generated 1.88% monthly returns and avoided several momentum crash periods.

Key Takeaways

Dual Momentum Edge: Combining time-series and cross-sectional momentum produced 1.88% average monthly returns and 22.36% annualized performance from 1927 through 2014.
Bear Market Resilience: Time-series momentum earned 0.57% monthly returns after down markets, while cross-sectional momentum returns became statistically insignificant.
Small Caps Stronger: Small-cap time-series momentum generated 0.78% monthly returns versus 0.47% for large caps, supporting gradual information diffusion and investor underreaction theories.
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