Industrial time series momentum strategies : performance of industrial time series momentum strategies

Abstract

This thesis documents significant profits for the Industrial Time Series Momentum strategies, using data from 17 industry portfolios in the US stock market, during time period from January 1985 to December 2018. Given 1 dollar investing in the Industrial Time Series Momentum strategies from the beginning of sample period, January 1985, an investor could end up with a maximum cumulative return of 126.75 dollars in December 2018. This cumulative return is around two times higher than that from a passive long strategy in all industries, and that from Fama-French market proxy. Among four Industrial Time Series Momentum strategies been studied in this thesis, the 1-month look back equally weighted and 12-month look back value weighted strategies are the most profitable ones. These two strategies deliver maximum significantly positive abnormal returns of 1.05 and 0.68 percent per month, respectively, after controlling for several risk factors. Also, the returns of Industrial Time Series Momentum strategies are not fully explained by any of the momentum factors that have been studied before. Furthermore, the performance of Industrial Time Series Momentum strategies is improved during extreme market conditions, making these strategies attractive for investors as a hedge tool.