Abstract: Moskowitz, Ooi, and Pedersen (2012) show that time series momentum delivers a large and significant alpha for a diversified portfolio of international futures contracts. We find that their results are largely driven by volatility-scaling returns (or the so-called risk parity approach to asset allocation) rather than by time series momentum. Without scaling by volatility, time series momentum and a buy-and-hold strategy offer similar cumulative returns, and their alphas are not significantly different. This similarity holds for most sectors and for a combined portfolio of futures contracts. Cross-sectional momentum also offers a higher (similar) alpha than unscaled (scaled) time series momentum.

Ph.D, CFA, FRM, Endowed Chair and Professor of Finance, College of Business Administration, University of Missouri–St. Louis

Dr. Yiuman Tse, Endowed Chair and Professor of Finance at The University of Missouri – St. Louis. He received his BS (Engineering) from the University of Hong Kong, MBA from SUNY-Binghamton, and PhD from Louisiana State University. His research interests are international investments and financial markets. He has articles published in Review of Financial Studies, Journal of Financial and Quantitative Analysis, Journal of Econometrics, Management Science, and others. Dr. Tse has received teaching awards from different universities, including the 2006 President’s Distinguished Achievement Awards for Teaching Excellence at The University of Texas at San Antonio. He is a CFA charterholder and certified Financial Risk Manager.

Vice Dean of school of economics, Fudan University