Time series momentum: Evidence from the European equity market

Darko B Vukovic; Salvatore Ingenito; Moinak Maiti

doi:10.1016/j.heliyon.2023.e12989

Time series momentum: Evidence from the European equity market

Heliyon. 2023 Jan 16;9(1):e12989. doi: 10.1016/j.heliyon.2023.e12989. eCollection 2023 Jan.

Authors

Darko B Vukovic^{1

2}, Salvatore Ingenito³, Moinak Maiti⁴

Affiliations

¹ International Laboratory for Finance and Financial Markets, Faculty of Economics, People's Friendship University of Russia (RUDN University), 6 Miklukho-Maklaya str., 117198, Moscow, Russia.
² Geographical Institute "Jovan Cvijic" SASA, Djure Jaksica 9, 11000, Belgrade, Serbia.
³ Università Cattolica del Sacro Cuore, Faculty for Banking, Finance and Insurance Sciences, Largo A. Gemelli 1, 20123, Milano, Italy.
⁴ Independent Researcher, Kolkata, 711112, India.

Abstract

This study empirically analyzes time series momentum (TSM) in the European equity market between 2000 & 2020. The study produces additional evidence on TSM where a significant and persistent market price anomaly enables investors to earn abnormal returns. To achieve this goal the present study implements a pooled autoregressive model to test the predictability power of European equity indices of future returns. The results indicate that strategies based on TSM are in line with the discussed literature and enable market agents to earn returns above the market (0.71% per month) by using a six-factor model.

Keywords: Asset allocation; Autoregression; Factor models; Price anomaly; Time series momentum.