How did Momentum investing perform after the previous two valuation peaks?
This article answers this question.
Key finding: Momentum investing also performed well following episodes when value stocks were cheap. Of course, momentum portfolios did not perform nearly as well as value portfolios, but they did still beat the generic market.
We dig into the details below.
This was a simple question posed to me by one of our blog readers--what impact does excluding stocks trading at 10x P/S have on a Momentum portfolio? A good question--especially for those who are "value" investors that are interested in momentum. For most systematic value investors, the prospect of adding stocks trading at over 10x P/S sounds ludicrous. Since I didn't know the exact impact, I went and ran the tests described below.
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