Momentum Investing Research

//Momentum Investing Research

Factor Investing is More Art, and Less Science

By | 2017-08-18T17:05:14+00:00 February 3rd, 2017|Factor Investing, Research Insights, Key Research, Value Investing Research, Momentum Investing Research, Size Investing Research|

Albert Einstein is reported to have said the following: The more I learn, the more I realize how much I don’t know. I can relate. Having studied finance for a long time (PhD, professor, books, [...]

How to Explain Momentum with Rational Investors — It’s complicated.

By | 2017-08-18T17:03:23+00:00 February 14th, 2017|Research Insights, Momentum Investing Research, $mtum|

A recent theory paper from researchers at NYU and Rutgers attempts to explain the empirical evidence on stock serial correlation (e.g., short-term reversal, long-term stock reversal, and classic stock momentum). The interesting wrinkle with this paper is the [...]

Will ETFs Destroy Factor Investing? Nope.

By | 2017-08-18T16:52:04+00:00 February 17th, 2017|Factor Investing, Research Insights, Guest Posts, Value Investing Research, Momentum Investing Research, Low Volatility Investing, Size Investing Research|

One of the popular investing truisms is the following (inspired by Bill Sharpe): For somebody to beat the market (win) someone else has to lag the market (lose). This becomes an even more daunting (efficient [...]

Dual Momentum with Stock Selection

By | 2017-08-18T17:05:58+00:00 March 14th, 2017|Trend Following, Research Insights, Momentum Investing Research, Tactical Asset Allocation Research|

Jack did a nice recap on a momentum paper last week that looks at using fundamentals (revenue volatility, low cost of goods, and B/M) to help identify the best price momentum stocks. This paper sounds similar to the paper Jack reviewed, but there is a key difference: the researchers are looking at the momentum of the fundamentals, not the absolute value of the fundamentals. The authors compile a fundamental momentum variable by calculating the moving averages of 7 elements: return on equity return on assets earnings per share accrual-based operating profitability cash-based operating profitability gross profitability net payout ratio

Swedroe Spotlight: Does Market Sentiment Help Explain Momentum?

By | 2017-08-18T16:56:30+00:00 April 17th, 2017|Larry Swedroe, Research Insights, Guest Posts, Behavioral Finance, Momentum Investing Research|

David Smith, Na Wang, Ying Wang and Edward Zychowicz contribute to the literature on momentum with their paper, “Sentiment and the Effectiveness of Technical Analysis: Evidence from the Hedge Fund Industry,” which was published in the December 2016 issue of the Journal of Financial and Quantitative Analysis. Their work examines how investor sentiment affects the effectiveness of technical analysis strategies (which include the use of moving averages as well as momentum) used by hedge funds (which are considered sophisticated investors). The study was motivated by prior research that has focused on “investor sentiment,” which is the propensity of individuals to trade on noise and emotions rather than facts. Sentiment causes investors to have beliefs about future cash flows and investment risks that aren’t justified. Two researchers, Malcolm Baker and Jeffrey Wurgler, constructed an investor sentiment index based on six measures: trading volume as measured by NYSE turnover; the dividend premium (the difference between the average market-to-book ratio of dividend-payers and non-payers); the closed-end fund discount; the number and first-day returns of IPOs; and the equity share in new issues. Data is available at through Wurgler and New York University.

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Looking to Improve your Factor Investing? Examine the Trend of Profits

By | 2017-08-18T17:01:20+00:00 April 4th, 2017|Factor Investing, Research Insights, Value Investing Research, Momentum Investing Research|

A few years ago, the profitability "quality" factor was originally proposed by Robert Novy-Marx. Here is a snippet from the abstract of the paper: Profitability, measured by gross profits-to-assets, has roughly the same power as [...]

Value and Momentum Investing in Frontier Stock Markets

By | 2017-08-18T16:53:54+00:00 April 18th, 2017|Factor Investing, Value Investing Research, Momentum Investing Research|

Value and Momentum investing have been studied across many different markets and asset classes (Asness et al 2013) and have shown to be effective factors. A working paper, "Frontier Stock Markets: Local vs Global Factors" [...]

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Visual Active Share: A Tool to Help Investors Make Better Decisions

By | 2017-08-18T16:52:56+00:00 April 6th, 2017|Factor Investing, Research Insights, Tool How-To-Guides, Tool Updates, Value Investing Research, Investor Education, Momentum Investing Research|

We've talked extensively about the concepts of active share and active fee, which aren't flawless metrics, but they have elevated the discussion around identifying and understand the closet indexing phenomenon. To be clear, closet indexing [...]

Swedroe Spotlight: Enhancing Momentum Strategies Via Idiosyncratic Momentum

By | 2017-08-18T16:56:29+00:00 May 2nd, 2017|Factor Investing, Larry Swedroe, Research Insights, Guest Posts, Momentum Investing Research|

Momentum is the tendency for assets that have performed well (poorly) in the recent past to continue to perform well (poorly) in the future, at least for a short period of time. The momentum effect [...]

Chinese Market Anomalies – The Factor Killer?

By | 2017-08-18T17:08:10+00:00 May 12th, 2017|Value Investing Research, Momentum Investing Research, Size Investing Research, Active and Passive Investing|

The Oracle of Omaha just commented on the Chinese stock market in this year's Berkshire's annual meeting: ...Markets have a casino characteristic that has a lot of appeal to people, particularly when they see people [...]

The Value Momentum Trend Philosophy

By | 2017-08-18T16:55:07+00:00 June 6th, 2017|Factor Investing, Trend Following, Research Insights, Key Research, Value Investing Research, Momentum Investing Research|

If you've been reading our blog for a number of years you're 1) probably a finance geek, and you're 2) probably tired of us discussing the following themes: Value investing: buy cheap stocks (see our [...]

Avoiding Overpriced Winners: A Better Way to Capture the Momentum Premium?

By | 2017-08-18T17:09:51+00:00 July 12th, 2017|Research Insights, Momentum Investing Research|

Any frequent reader of our blog knows we are fans of momentum investing. At this point, investment professionals should know that momentum historically works, that momentum is painful, and we have our own opinions on how [...]

Trick Question: How is the Momentum Factor Performing YTD?

By | 2017-08-18T16:54:19+00:00 July 24th, 2017|Research Insights, Momentum Investing Research|

If you ask your typical long-only investor (or financial advisor) how momentum is doing this year they'll likely say, "Amazing!" This statement will almost surely be based on the fact they own (or know about) the [...]

Short Term Momentum and Long Term Reversals Can Coexist

By | 2017-08-28T10:27:32+00:00 August 30th, 2017|Factor Investing, Larry Swedroe, Research Insights, Other Insights, Momentum Investing Research|

In their seminal 1993 paper, “Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency,” Narasimhan Jegadeesh and Sheridan Titman reported significant returns to buying winners and selling losers in the U.S. equity [...]