Acceleration in Financial Asset Returns
39 Pages Posted: 7 Jul 2020 Last revised: 8 Jul 2020
Date Written: June 10, 2020
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: Suggested Citation