Time Series Momentum Or Reversal Strategy

In recent years, there are a number of comprehensive studies of momentum effect and reversal effect in the capital market among domestic and overseas scholars. At present, the studies of momentum effect and reversal effect mainly concentrate on the cross-section momentum and reversal effect, which is, the differentiation of capital cross-section, so there are not many researches concentrate on time series momentum of single assets, which is, the sustainability of earnings itself. Some relevant domestic literatures have studied the time series momentum of stock index futures, because of the absence of short sales mechanism in Chinese stock market, plus the limitation on the scope and scale of securities margin trading, there is little practical operability of momentum investment strategy.The study object of this thesis is the weekly and daily data of IF300stock market futures. The thesis have conduct the analysis of the existence and earning features of time series momentum and reverse effect in the single asset. Firstly, this thesis calculates the volatility of IF300stock index futures by applying the rules of moving averages and figures out the ex-anti volatility. Then the thesis constructs the time series momentum and the reversal strategy on frequency of both daily and weekly return rate, and gets the mean value and T-statistic of different holding period and look-back period strategy, then conduct the further regression of the relevant mean value with Fama-French Three-Factor Model, and then gets the risk-adjusted return which is the intercept term, the coefficients and the T-statistics of each risk factor, to verify the significance of time series momentum and the reverse strategy earnings. Based on previous analysis, with the above-mentioned strategy of significantearnings as the study object, to observe the relationship between it and the strategy of passive long only, and plot the excess earnings of time series momentum portfolio on the excess earnings of Shanghai Composite Index of the same period, to study the behaviors under the extreme circumstance in the market.The main conclusions of the thesis are listed as follows:first, to the certain extend but not obviously, there are time series momentum effects only on daily return frequency in Chinese stock index futures market, and there are obvious time series reverse effects on daily and weekly return frequency. Second, the robustness of time series momentum or the reverse effect earnings is not strong, of which the returns can be partly explained by traditional risk factor model. Third, the portfolio earnings according to both the time series momentum strategy and the reverse strategy obviously exceed the earnings according to the passive long-only portfolio strategy. Fourth, under the extreme circumstance of the market, the earnings of time series momentum portfolio will reach the highest level. Besides this, the return features of time series momentum investment strategy is much like the ones of straddle in the option-based investment strategy.