Abstract
We document a new cross-asset phenomenon in bond and equity markets that we refer to as cross-asset time series momentum. Using a broad international data set, we show that past bond market returns are positive predictors of future equity market returns, and past equity market returns are negative predictors of future bond market returns. We use these patterns of cross-asset predictability to construct a diversified cross-asset time series momentum portfolio that yields a Sharpe ratio over 40% higher than a standard time series momentum portfolio. We then present evidence that both time series momentum and cross-asset time series momentum are driven by slow-moving capital in bond and equity markets.
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