### Time Series and Dual Momentum for Individual Stocks

**February 10, 2016** - Momentum Investing

Does a time series (absolute or intrinsic) momentum strategy work at the stock level? In their January 2016 paper entitled “The Enduring Effect of Time-Series Momentum on Stock Returns Over Nearly 100-Years” Ian D’Souza, Voraphat Srichanachaitrchok, George Wang and Yaqiong Yao test the significance of time series momentum among individual stocks. Their baseline time series momentum strategy consists of each month calculating cumulative returns for each stock from 12 months ago to one month ago and taking a long (short) position for one month in stocks with positive (negative) past returns. For comparison, they also test a cross-sectional, or relative, momentum strategy that is each month long (short) the tenth, or decile, of stocks with the highest (lowest) cumulative returns over the same measurement interval. They skip the month between past return measurement and portfolio formation to avoid a reversal effect. They consider both value and equal weighting. They then test a dual momentum strategy that each month: (1) identifies time series momentum winners and losers; (2) ranks these two groups separately into fifths (quintiles); and, (3) buys the top quintile of time series winners and sells the bottom quintile of time series losers. Using monthly data for a broad U.S. stock sample during 1926 through 2014 and for stock samples from 13 other developed markets during mostly 1975 through 2014, *they find that:* Keep Reading