Acceleration in Financial Asset Returns

39 Pages Posted: 7 Jul 2020 Last revised: 8 Jul 2020

Date Written: June 10, 2020

Abstract

We show that acceleration, a modified "echo momentum" of Novy-Marx (2012), predicts returns for a large set of financial assets: individual stocks, global equity indices, global sovereign bonds, currencies, mutual funds and hedge funds. This paper extends the results from Ardila-Alvarez et al. (2013), who define acceleration as the first difference of successive returns, in showing that acceleration predicts returns for out-of-sample time periods and a larger set of assets as well. These patterns induce that the acceleration effect is a pervasive effect across financial markets, with returns greater than for momentum portfolios. The magnitude of the returns implied by acceleration-sorted portfolios provides a novel puzzle for theoretical research in asset pricing: how can we reconcile such an anomaly with efficient-markets?

Keywords: Asset-pricing, momentum, anomalies, mutual funds, hedge funds

JEL Classification: G12, G23

Suggested Citation

Becam, Adrien, Acceleration in Financial Asset Returns (June 10, 2020). Available at SSRN: https://ssrn.com/abstract=3624879 or http://dx.doi.org/10.2139/ssrn.3624879

Adrien Becam (Contact Author)

Banque de France ( email )

31 rue Croix des Petits-Champs
Paris Cedex 01, 75049
France

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