Finance Discipline Group
UTS Business School
University of Technology, Sydney

Working Paper Series

State-dependent Momentum in International Stock Markets
Author(s): Dirk G. Baur and Thomas Dimpfl
Date of publication: August 2012
Working paper number: 169
We estimate quantile autoregression (QAR) models to analyze variations in the autoregressive coefficients of 55 international stock index returns and demonstrate that it is important to allow the autoregressive parameters to vary with quantiles. The empirical results identify distinctively different patterns of autoregressive coefficients in the lower, central and upper quantiles of the distribution across all countries. More specifically, the study suggests that investors follow momentum strategies in lower quantiles or "bad states". We also demonstrate that the quantile autoregression estimates can be used to test for asymmetric responses of the volatility.
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