Eugene Fama, the 2014 co-recipient of the Nobel Prize in Economics and father of the efficient market hypothesis, and his equally well-credentialed co-author, Ken French, have summarized the academic research on momentum as follows:[ref]Fama, E. [...]
Momentum has historically been a great strategy. Although counter-intuitive to many value investors, buying stocks with rising prices has been a great investment approach--arguably better than value investing. Moreover, the approach is robust between the 2 samples analyzed. The lesson is clear: Let your winners ride and cut your losers short.
We have already documented the returns to generic momentum investing strategies. Within the fund marketplace, many investors focus on fees and less on process. For example, Morningstar highlights the fees as "cost-efficient" for a specific momentum fund, MTUM. However, fees are [...]
The evidence suggests that we keep highly active exposures to value and momentum in their purest forms (assuming we are doing high-conviction non-watered down versions of the anomalies). Blending the strategy dilutes the benefit of value and momentum portfolios. The summary of the benefits of a pure value and a pure momentum approach can be summarized as follows: Easier ex-post assessment, stronger portfolio diversification benefits, and stronger expected performance.
Frog in the Pan: Continuous Information and Momentum Da, Gurun and Warachka A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic Research Recap Category. Abstract: [...]
Causes and Seasonality of Momentum Profits Richard Sias A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic Research Recap Category. Abstract: With Januaries (a month [...]
Awww...modern portfolio theory...that feel-good construct I teach to all of my graduate-level finance students each year. Simply input 1) a vector of expected returns and 2) a covariance matrix into your computer, and voilà, you [...]
Momentum Has Not Been 'Overgrazed': A Visual Overview in 10 Slides Claude B. Erb A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic Research [...]
Expected Skewness and Momentum Jacobs, Regele and Weber A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic Research Recap Category. Abstract: Motivated by the time-series [...]
Combining Value and Momentum Fisher, Shah and Titman (2014) A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic Research Recap Category! Abstract: This paper considers [...]
Quick Summary For a bond momentum strategy, it makes sense to select the top 3 or top 6 funds. The starting universe matters. One must consider the taxes and transaction costs associated with the strategy, which can [...]
Beating a Dead Horse: Value investing and momentum investing work At this stage in our lives we've essentially memorized the CRSP/Compustat database. Name an anomaly and we can probably tell you the stats on it fairly quickly. [...]
There is sometimes confusion associated with so-called "momentum" strategies--we want to clear the muddy waters. We break momentum into two categories to differentiate between the different approaches to momentum: (1) Absolute, or time-series momentum: an asset classes' [...]
Pop quiz: A stock you own just hit a 52-week high... Does it make you nervous? On Wall Street, there are many highly publicized metrics that can trigger an emotional response in investors. The “52-week high” [...]
Multifactor Explanations of Asset Pricing Anomalies Fama and French (1996) A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic Research Recap Category. Abstract: Previous work [...]
Higher‐Moment Risk Exposures in Hedge Funds This paper singles out the key roles of US equity skewness and kurtosis in the hedge fund return generating process. We propose a conditional higher‐moment model with location, trading, [...]
Fundamentally, Momentum is Fundamental Momentum Momentum in firm fundamentals, i.e., earnings momentum, explains the performance of strategies based on price momentum. Earnings surprise measures subsume past performance in cross sectional regressions of returns on firm [...]
We were recently passed along an article suggesting that valuation spreads, or the spread in a valuation metric across the most expensive and least expensive stocks, matters for timing investments. We take this concept one step further [...]
The Momentum Gap and Return Predictability Simon Huang A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic Research Recap Category. Abstract: Momentum strategies have historically [...]
A Tug of War: Overnight Versus Intraday Expected Returns Lou, Polk and Skouras A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic Research Recap Category. [...]
