The Impact of Information Dissemination (Measured by Information Discontinuity and Noise) on the Effect of Industry Time-Series Momentum under Economic Boom and Recession Conditions
Keywords:
Information discontinuity, noise level, frog in the frying pan hypothesis, momentum, time seriesAbstract
Among the anomalies observed in contrast to classical finance is momentum, a concept derived from physics that represents the persistence in past performance and examines the existence of inertia and the root of continuity in the future outperformance of previous winning stocks and the underperformance of previous losing stocks. On the other hand, industry time-series momentum focuses solely on absolute performance, and its strategies are dependent on temporally varying net long positions. Hence, time-series momentum has outpaced other strategies. In examining the role of information dissemination on the effect of industry time-series momentum, indicators with valid meanings were selected under both positive and negative signals in order to incorporate the dimension of the informational environment. In this regard, information discontinuity and noise level were used as proxies and measured across 120 listed companies using a systematic elimination method and within four decile-based portfolios structured under 3-month strategies over holding periods ranging from 1 to 36 months, during the years 2021 to 2023. Ultimately, across all long-term portfolio formation strategies, including two short-term and nine short-term holding periods, the effect of industry time-series momentum was found to be stronger during boom periods; thus, the research hypothesis is confirmed.
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Copyright (c) 2025 Fatemeh Ahmadi Nezamabadi (Author); Seyed Rasoul Hosayni, Azar Moslemi (Corresponding author); Abolfazl Saeidifar (Author)
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
