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The trend premium around the world: Evidence from the stock market

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  • Hai Lin
  • Pengfei Liu
  • Cheng Zhang

Abstract

This paper studies the predictive power of the trend strategy in the international stock market. Using data from 49 markets, we find that a trend signal exploiting the short‐, intermediate‐, and long‐term price information can predict stock returns cross‐sectionally in the international market. The significance of the trend strategy is associated with market‐level characteristics such as macroeconomic conditions, culture, and the information environment. The trend premium is more pronounced in markets with a more advanced macroeconomic status, a higher level of information uncertainty and individualism, and better accessibility to foreign investors. Nevertheless, the trend strategy only outperforms the momentum strategy in a relatively short horizon.

Suggested Citation

  • Hai Lin & Pengfei Liu & Cheng Zhang, 2023. "The trend premium around the world: Evidence from the stock market," International Review of Finance, International Review of Finance Ltd., vol. 23(2), pages 317-358, June.
    • Handle: RePEc:bla:irvfin:v:23:y:2023:i:2:p:317-358
    DOI: 10.1111/irfi.12400
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