This article studies an actively managed bond strategy based on time series momentum in sovereign bond markets. The author assesses the performance of an active strategy and investigates diversification benefits in comparison with a passive buy-and-hold strategy when each strategy is combined with international equity indexes. The analysis provides evidence that the active strategy offers higher expected returns without increasing return volatility. Importantly, and in comparison with the passive strategy, the active strategy results in both significant return and diversification enhancements when combined with international equity indexes. Therefore, the author suggests that his active momentum strategy can serve fund managers as an alternative to common long-only passive bond strategies to enhance the riskadjusted return of a combined portfolio of sovereign bonds and equities.

This study investigates the measurement bias introduced by the widespread use of overlapping returns in time series momentum (TSM) research, which can materially overstate the strength of TSM signals. Using a univariate AR(1) framework, simulations, and S&P 500 and S&P/ASX 200 index data from 1996 to 2019, we link TSM strength to return autocorrelation, volatility and the look-back horizon under both overlapping and non-overlapping return constructions. The analysis shows that overlapping returns mechanically accumulate autocorrelation, generating the familiar monotonic increase in measured TSM strength as the look-back period lengthens. Empirically, we find that return autocorrelation is the dominant driver of measured TSM strength and that the monotonic look-back profile becomes weaker and less systematic when non-overlapping returns are used. The AR(1) framework predicts a negative relation between volatility and TSM strength, and we observe this sign in both markets, but the estimated effects are not statistically significant at conventional levels. These results highlight the risk that overlapping returns artificially inflate momentum signals, with implications for backtesting robustness and portfolio risk management.

Standard early warning models to predict bank failures cannot be estimated during periods of few or zero failures, precluding any updating of such models during

Evidence from many developed markets suggests that fundamental indices outperform capitalisation-weighted indices. Existing studies suspect a story of market mispricing, yet a mechanism has not been identified. Using Australian data, we study the relation between analyst forecast errors and the performance of various fundamental indices. We find that fundamental indices contain a relatively higher exposure to stocks with low analyst long-term growth forecasts. Valuations for these stocks are ex ante overly pessimistic and drive the statistical significance of alphas produced by fundamental indexation. We show how hedging against analyst forecast errors can generate additional alpha for investors using fundamental indexation.