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Return predictability and contrarian profits of international index futures
Author(s) -
Tse Yiuman
Publication year - 2018
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.21892
Subject(s) - contrarian , predictability , futures contract , economics , momentum (technical analysis) , equity (law) , financial economics , futures market , index (typography) , lag , emerging markets , monetary economics , macroeconomics , computer network , physics , quantum mechanics , world wide web , political science , computer science , law
Using futures markets, we examine the lead‐lag relationships among 11 industrialized countries. Lagged monthly returns for several countries have return predictability comparable to those in the United States for the 1988–2016 period. The international futures markets are more correlated in market downturns, while the lead‐lag relationships are more significant in market upturns. Consistent with these asymmetric relationships, a contrarian strategy (in particular, by buying the losers) offers significant profits in an up market but not in a down market. The contrarian profits are not captured by a factor model using global equity factors and momentum profits.