In this article, the authors document robust momentum behavior in a large collection of 65 widely-studied, characteristic-based equity factors around the globe. They show that, in general, individual factors can be reliably timed based on their own recent performance. A time series “factor momentum” portfolio that combines timing strategies of all factors earns an annual Sharpe ratio of 0.84. Factor momentum adds significant incremental performance to investment strategies that employ traditional momentum, industry momentum, value, and other commonly studied factors. Their results demonstrate that the momentum phenomenon is driven in large part by persistence in common return factors and not solely by persistence in idiosyncratic stock performance.
“Factor Momentum Everywhere” won “Best Quant Paper” in the 2019 Savvy Investor Awards, recognizing its quality, readability and appeal to an institutional investor audience. Read more from the Savvy Investor.
“Factor Momentum Everywhere” was named “Best Article” in the 2020 Bernstein Fabozzi/Jacobs Levy Awards. Winners are selected annually by readers of The Journal of Portfolio Management to acknowledge and highlight the most innovative and compelling research published each year.
Full article here.