title: Time-series and cross-sectional momentum investment strategies: International evidence

authors: Gao, Xiaojun

subjects: strategy

abstract: Numerous studies have found that profits that can be realised from following a momentum-based investment strategy of buying recent outperforming stocks (winners) and selling recent underperforming stocks (losers) (Jegadeesh & Titman, 1993, 2001). Momentum strategies have proved to be robust across time, countries and asset classes, leading Fama (1998) to observe that momentum remains the “premier unexplained anomaly”. The existence of the momentum abnormal returns continues to challenge the market efficiency theory.
The majority of momentum studies have investigated cross-sectional momentum strategies in which stocks are selected on the basis of their relative performances over some prior period. In a recent study, Moskowitz, Ooi, and Pedersen (2012) introduce a time-series momentum strategy which provides an alternative approach to security selection where stocks are chosen on the basis of their absolute performance over some prior period.
Although previous literature has evaluated momentum strategies in numerous markets settings, by far the bulk of these studies have concentrated on equity markets. Therefore, it is somewhat surprising that we are yet to see a comprehensive study that compares the two types of momentum strategies in this arena. The main objective of this study is to evaluate and compare the performances of the two momentum strategies in the security markets in order to examine validation of the market efficiency theory across international stock markets.
The study addresses the objective in three stages: before-transaction costs performance (raw returns), after-transaction costs performance (net returns) and after-transaction costsperformance adjusted for risks (risk-adjusted net returns). A further by-product of our research is that we utilise a large number of implementation alternatives for both momentum strategies and so provides an insight into the optimal way to implement both time-series and cross-sectional momentum strategies.
Before transaction cost (raw) return:
The first thing that has been found is that the time-series and cross-sectional momentum returns reduce as we increase the cut-offs used when choosing both winning and losing stocks and so increase the number of stocks in the momentum portfolios (i.e. including 32%, 60% and all stocks in either the winner or loser portfolios). The extension of the cut-offs from 32% to 100% results in a reduction in the returns on the momentum portfolios by approximately 50% on average based on the pooled data for the 24 markets. Having established this, we then use the 32% cut-offs over the remainder of our analysis.
The study finds that both time-series and cross-sectional momentum strategies produce significant positive outcomes under numerous implementations in the majority of developed stock markets with the major exceptions being Greece, Israel, Japan, Hong Kong, Portugal, Spain and the US. The time-series momentum strategy outperforms the cross-sectional momentum strategy under optimal implementations conditions in all markets and is statistically significant in half of these markets.
After transaction costs (net) returns, and risk-adjustment net returns:
We find that the transaction costs and standard risk explain most profitability of the time-series and cross-sectional momentum strategies. In terms of the Fama-French alpha determined using after-transaction costs return, about 6% on average of the implementations evaluated produce significant positive risk-adjusted net returns. There are absolutely no implementations that yield significant positive returns in Austria, France, Germany, Greece, Hong Kong, Israel, Japan, Norway, Portugal, Singapore, Spain and the US., while less than 5%of the implementations in Australia, Canada, and Ireland. The findings support that the market efficiency hypothesis still holds across the most markets in our sample and the existence of exploitable investment opportunities is rare.
The study particularly concentrates on the optimal implementations of both the time-series and cross-sectional momentum strategies across the 24 markets. Common characteristics of these optimal implementations for the risk-adjusted net returns are that they combine a formation and a holding period of between 15 and 18 months, a buy-and-hold portfolio construction policy and the use of either a market or inversed-volatility portfolio weighting scheme.
Based on the optimal implementation approach for each market, the overall performance of the two momentum strategies is eroded from 2.09% (raw return) to 1.34% (net return) and to 0.9% (Fama-French alpha) for the time-series momentum strategy, and from 1.43% (raw return) to 0.87% (net return) and finally to 0.51% (Fama-French alpha) for the cross-sectional momentum strategy. At each of the three steps along the way, this study finds that the time-series momentum strategy continues to outperform the cross-sectional momentum strategy; however the magnitude of the superior performance is diluted with an average difference from 0.66% (raw return) to 0.47% (net return) and to 0.39% (Fama-French alpha). In addition, the superior performance of the time-series momentum strategy relative to the cross-sectional momentum strategy comes during periods when the markets have been performing poorly but that this advantage also erodes as we proceed from raw returns to net returns to risk-adjusted net returns.
One possible explanation for the superiority of the time-series momentum strategy is that it forms portfolios of slightly smaller capitalization stocks with a greater spread in past performance between the winner and loser stocks. Both of these features suggest that thetime-series momentum strategy will outperform the cross-sectional momentum strategy. On the other hand, the transaction costs and risk from the time-series momentum strategy are higher than the costs from the cross-sectional momentum strategy which is largely a consequence of time-series momentum strategy selecting smaller and growth stocks, and generating a higher turnover over a market cycle, so it is not surprising that the outperformance of the time-series momentum strategy becomes smaller after adjusting for risk on an after-transaction costs basis.

text: Time-series and cross-sectional momentum investment strategies: International evidence Numerous studies have found that profits that can be realised from following a momentum-based investment strategy of buying recent outperforming stocks (winners) and selling recent underperforming stocks (losers) (Jegadeesh & Titman, 1993, 2001). Momentum strategies have proved to be robust across time, countries and asset classes, leading Fama (1998) to observe that momentum remains the “premier unexplained anomaly”. The existence of the momentum abnormal returns continues to challenge the market efficiency theory.
The majority of momentum studies have investigated cross-sectional momentum strategies in which stocks are selected on the basis of their relative performances over some prior period. In a recent study, Moskowitz, Ooi, and Pedersen (2012) introduce a time-series momentum strategy which provides an alternative approach to security selection where stocks are chosen on the basis of their absolute performance over some prior period.
Although previous literature has evaluated momentum strategies in numerous markets settings, by far the bulk of these studies have concentrated on equity markets. Therefore, it is somewhat surprising that we are yet to see a comprehensive study that compares the two types of momentum strategies in this arena. The main objective of this study is to evaluate and compare the performances of the two momentum strategies in the security markets in order to examine validation of the market efficiency theory across international stock markets.
The study addresses the objective in three stages: before-transaction costs performance (raw returns), after-transaction costs performance (net returns) and after-transaction costsperformance adjusted for risks (risk-adjusted net returns). A further by-product of our research is that we utilise a large number of implementation alternatives for both momentum strategies and so provides an insight into the optimal way to implement both time-series and cross-sectional momentum strategies.
Before transaction cost (raw) return:
The first thing that has been found is that the time-series and cross-sectional momentum returns reduce as we increase the cut-offs used when choosing both winning and losing stocks and so increase the number of stocks in the momentum portfolios (i.e. including 32%, 60% and all stocks in either the winner or loser portfolios). The extension of the cut-offs from 32% to 100% results in a reduction in the returns on the momentum portfolios by approximately 50% on average based on the pooled data for the 24 markets. Having established this, we then use the 32% cut-offs over the remainder of our analysis.
The study finds that both time-series and cross-sectional momentum strategies produce significant positive outcomes under numerous implementations in the majority of developed stock markets with the major exceptions being Greece, Israel, Japan, Hong Kong, Portugal, Spain and the US. The time-series momentum strategy outperforms the cross-sectional momentum strategy under optimal implementations conditions in all markets and is statistically significant in half of these markets.
After transaction costs (net) returns, and risk-adjustment net returns:
We find that the transaction costs and standard risk explain most profitability of the time-series and cross-sectional momentum strategies. In terms of the Fama-French alpha determined using after-transaction costs return, about 6% on average of the implementations evaluated produce significant positive risk-adjusted net returns. There are absolutely no implementations that yield significant positive returns in Austria, France, Germany, Greece, Hong Kong, Israel, Japan, Norway, Portugal, Singapore, Spain and the US., while less than 5%of the implementations in Australia, Canada, and Ireland. The findings support that the market efficiency hypothesis still holds across the most markets in our sample and the existence of exploitable investment opportunities is rare.
The study particularly concentrates on the optimal implementations of both the time-series and cross-sectional momentum strategies across the 24 markets. Common characteristics of these optimal implementations for the risk-adjusted net returns are that they combine a formation and a holding period of between 15 and 18 months, a buy-and-hold portfolio construction policy and the use of either a market or inversed-volatility portfolio weighting scheme.
Based on the optimal implementation approach for each market, the overall performance of the two momentum strategies is eroded from 2.09% (raw return) to 1.34% (net return) and to 0.9% (Fama-French alpha) for the time-series momentum strategy, and from 1.43% (raw return) to 0.87% (net return) and finally to 0.51% (Fama-French alpha) for the cross-sectional momentum strategy. At each of the three steps along the way, this study finds that the time-series momentum strategy continues to outperform the cross-sectional momentum strategy; however the magnitude of the superior performance is diluted with an average difference from 0.66% (raw return) to 0.47% (net return) and to 0.39% (Fama-French alpha). In addition, the superior performance of the time-series momentum strategy relative to the cross-sectional momentum strategy comes during periods when the markets have been performing poorly but that this advantage also erodes as we proceed from raw returns to net returns to risk-adjusted net returns.
One possible explanation for the superiority of the time-series momentum strategy is that it forms portfolios of slightly smaller capitalization stocks with a greater spread in past performance between the winner and loser stocks. Both of these features suggest that thetime-series momentum strategy will outperform the cross-sectional momentum strategy. On the other hand, the transaction costs and risk from the time-series momentum strategy are higher than the costs from the cross-sectional momentum strategy which is largely a consequence of time-series momentum strategy selecting smaller and growth stocks, and generating a higher turnover over a market cycle, so it is not surprising that the outperformance of the time-series momentum strategy becomes smaller after adjusting for risk on an after-transaction costs basis.

year: 2012

title: The performance of thermally sprayed titanium based composite coatings in molten aluminium

authors: Salman, Asma Siddiq

subjects: mechanical milling

abstract: The service life of die and tool steels in contact with molten aluminium is important in the aluminium processing industry. This article describes an investigation of the efficiency of thermally sprayed Ti(Al,O)/Al₂O₃ and TiAl(O)/Al₂O₃ composite coatings in resisting aluminium soldering on H13 tool steel. The powder feedstocks for making the composite coatings were produced by high energy mechanical milling of a mixture of Al and TiO₂ powders using different molar ratios followed by a thermal reaction process. The feedstocks were then thermally sprayed using a high velocity oxygen fuel (HVOF) technique onto an H13 steel substrate to produce composite coatings. The performance of the coatings was assessed in terms of Al soldering and liquid metal corrosion resistance after immersing in molten aluminium at a temperature of 700 ± 10 °C. The results of this study showed that composite coatings have a potential to act as a physical barrier to prevent aluminium attack on H13 tool steel. The nature of Al attack on H13 tool steel changed from generalised to more localised attack with the thermally sprayed coating. A Ti(Al,O)/Al₂O₃ composite coating was not attacked by molten aluminium, however localised attack on a H13 tool steel substrate was found to be caused by molten metal penetration through defects in the coating. Composite coating TiAl(O)/Al₂O₃ was attacked by molten aluminium resulting in dissolution of the coating. Composite coatings showed significantly lower dissolution in molten aluminium compared with the uncoated H13 steel. A Ti(Al,O)/Al₂O₃ composite coating was found to be a more effective protective coating than a TiAl(O)/Al₂O₃ composite coating due its greater resistance to molten aluminium attack.

text: The performance of thermally sprayed titanium based composite coatings in molten aluminium The service life of die and tool steels in contact with molten aluminium is important in the aluminium processing industry. This article describes an investigation of the efficiency of thermally sprayed Ti(Al,O)/Al₂O₃ and TiAl(O)/Al₂O₃ composite coatings in resisting aluminium soldering on H13 tool steel. The powder feedstocks for making the composite coatings were produced by high energy mechanical milling of a mixture of Al and TiO₂ powders using different molar ratios followed by a thermal reaction process. The feedstocks were then thermally sprayed using a high velocity oxygen fuel (HVOF) technique onto an H13 steel substrate to produce composite coatings. The performance of the coatings was assessed in terms of Al soldering and liquid metal corrosion resistance after immersing in molten aluminium at a temperature of 700 ± 10 °C. The results of this study showed that composite coatings have a potential to act as a physical barrier to prevent aluminium attack on H13 tool steel. The nature of Al attack on H13 tool steel changed from generalised to more localised attack with the thermally sprayed coating. A Ti(Al,O)/Al₂O₃ composite coating was not attacked by molten aluminium, however localised attack on a H13 tool steel substrate was found to be caused by molten metal penetration through defects in the coating. Composite coating TiAl(O)/Al₂O₃ was attacked by molten aluminium resulting in dissolution of the coating. Composite coatings showed significantly lower dissolution in molten aluminium compared with the uncoated H13 steel. A Ti(Al,O)/Al₂O₃ composite coating was found to be a more effective protective coating than a TiAl(O)/Al₂O₃ composite coating due its greater resistance to molten aluminium attack.

year: 2011

title: A criterion referenced analysis and evaluation of the processes involved in formulating a Māori language regeneration strategy for Whakamārama marae

authors: Lewis, Roger Brian

subjects: critical success factors

abstract: The quality of the processes involved in language regeneration strategy formation is critical to the creation of an effective language regeneration strategy and this, in turn, is critical to the achievement of successful language regeneration outcomes. The overall aim of this research project was to evaluate, using a range of effectiveness criteria, the processes involved in the creation of a marae-based te reo Māori regeneration strategy in the hope that others involved in similar projects in the future would benefit and in the hope that the Whakamārama whānau will themselves derive benefit from it in reviewing what has already been achieved. In Chapter 1, the background to the research project and its rationale are outlined
and the research questions and research methods are introduced. Chapter 2 provides a critical review of selected literature in the area of strategic planning aspects of language regeneration and relevant aspects of mātauranga Māori. Using an ethnographic approach, the processes and immediate outcomes (in terms of a
survey report and a regeneration plan for Whakamārama marae) of the language regeneration project are outlined in Chapter 3. In Chapter 4, effectiveness criteria are derived on the basis of the literature review in Chapter 2. These include criteria relating to leadership, participation, Kaupapa Māori values, environmental
analysis and outcomes. The criteria are then applied to the analysis and evaluation of the processes and outcomes outlined in Chapter 3 in order to identify their strengths and weaknesses. The overall conclusion is that Whakamārama's
language regeneration activities to date can be regarded as successful in many ways, including the fact that they have resulted in the production of high quality documentation that is widely appreciated by the whānau in the form of a maraebased language survey and a marae-based te reo Māori regeneration plan. Working voluntarily and often under difficult circumstances, core group members demonstrated that they possessed the essential characteristics of commitment,
motivation and determination, in addition to the willingness and ability to use existing skills and knowledge effectively and to develop further skills and knowledge as the project proceeded. Perhaps most important, they developed a caring and effective working culture. However, the weaknesses of the project included a lack of preparation and planning prior to the commencement of the project which resulted in a build up of work at a number of stages. This, in turn, lead to delays in producing outcomes and some loss of momentum. It also led, indirectly, to the views of two or three members of the core group being overrepresented in the reo plan goals. The information and analysis provided here
have relevance to any language community involved in micro-level language regeneration activities of a similar type. It is hoped therefore that this thesis may help others to not only avoid the problems experienced by the Whakamārama whānau but also to benefit from their successes.

text: A criterion referenced analysis and evaluation of the processes involved in formulating a Māori language regeneration strategy for Whakamārama marae The quality of the processes involved in language regeneration strategy formation is critical to the creation of an effective language regeneration strategy and this, in turn, is critical to the achievement of successful language regeneration outcomes. The overall aim of this research project was to evaluate, using a range of effectiveness criteria, the processes involved in the creation of a marae-based te reo Māori regeneration strategy in the hope that others involved in similar projects in the future would benefit and in the hope that the Whakamārama whānau will themselves derive benefit from it in reviewing what has already been achieved. In Chapter 1, the background to the research project and its rationale are outlined
and the research questions and research methods are introduced. Chapter 2 provides a critical review of selected literature in the area of strategic planning aspects of language regeneration and relevant aspects of mātauranga Māori. Using an ethnographic approach, the processes and immediate outcomes (in terms of a
survey report and a regeneration plan for Whakamārama marae) of the language regeneration project are outlined in Chapter 3. In Chapter 4, effectiveness criteria are derived on the basis of the literature review in Chapter 2. These include criteria relating to leadership, participation, Kaupapa Māori values, environmental
analysis and outcomes. The criteria are then applied to the analysis and evaluation of the processes and outcomes outlined in Chapter 3 in order to identify their strengths and weaknesses. The overall conclusion is that Whakamārama's
language regeneration activities to date can be regarded as successful in many ways, including the fact that they have resulted in the production of high quality documentation that is widely appreciated by the whānau in the form of a maraebased language survey and a marae-based te reo Māori regeneration plan. Working voluntarily and often under difficult circumstances, core group members demonstrated that they possessed the essential characteristics of commitment,
motivation and determination, in addition to the willingness and ability to use existing skills and knowledge effectively and to develop further skills and knowledge as the project proceeded. Perhaps most important, they developed a caring and effective working culture. However, the weaknesses of the project included a lack of preparation and planning prior to the commencement of the project which resulted in a build up of work at a number of stages. This, in turn, lead to delays in producing outcomes and some loss of momentum. It also led, indirectly, to the views of two or three members of the core group being overrepresented in the reo plan goals. The information and analysis provided here
have relevance to any language community involved in micro-level language regeneration activities of a similar type. It is hoped therefore that this thesis may help others to not only avoid the problems experienced by the Whakamārama whānau but also to benefit from their successes.

year: 2007