Replicating Time-Series Momentum: Moskowitz, Ooi, and Pedersen (2012)

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Abstract

This paper replicates the seminal time-series momentum (TSMOM) strategy introduced by Moskowitz, Ooi, and Pedersen (2012) using R. The implementation covers 28 futures contracts across four asset classes: commodities, foreign exchange, equity indices, and fixed income instruments, spanning the period from 1986 to 2009. The TSMOM strategy exploits persistent trends in asset prices by taking long positions in instruments with positive recent returns and short positions in those with negative recent returns, with volatility-targeted position sizing to equalize risk contributions. Our replication successfully demonstrates the strategy's ability to deliver superior risk-adjusted returns with a Sharpe ratio exceeding 1.0, while providing significant crisis alpha during market downturns. Notably, the strategy significantly outperforms the S&P 500 during periods of market stress, offering valuable portfolio diversification benefits. We provide detailed analysis of strategy construction, risk management techniques, and performance attribution across different market regimes and asset classes.

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