Nice Mo review paper by Moskowitz
Also another longer academic paper here Time Series Momentum
Abstract
We document significant “time series momentum” in equity index, currency, commodity, and bond futures for each of the 58 liquid instruments we consider. We find persistence in returns for 1 to 12 months that partially reverses over longer horizons, consistent with sentiment theories of initial under-reaction and delayed over-reaction. A diversified portfolio of time series momentum strategies across all asset classes delivers substantial abnormal returns with little exposure to standard asset pricing factors, and performs best during extreme markets. We show that the returns to time series momentum are closely linked to the trading activities of speculators and hedgers, where speculators appear to profit from it at the expense of hedgers.
And now more on how to exploit momentum while avoiding the reversals…
Abstract:
Various theories have documented that momentum is followed by reversal in the long term. This paper constructs a new momentum-reversal strategy by avoiding the stocks that are more likely to approach reversals in the winner and loser groups. The results show that the risk-adjusted returns of the new strategy are significantly higher than those of the traditional momentum strategy documented by JT (1993) and Carhart (1997). Such a finding is robust in different time periods and size quintiles. Moreover, the risk-adjusted returns of the new strategy cannot be fully explained by Carhart’s four-factor model and the corresponding timing activities.
