Value and Momentum Everywhere

June 01, 2013

The Journal of Finance

We find consistent value and momentum return premia across eight diverse markets and asset classes, and a strong common factor structure among their returns. Value and momentum returns correlate more strongly across asset classes than passive exposures to the asset classes, but value and momentum are negatively correlated with each other, both within and across asset classes.

Our results indicate the presence of common global risks that we characterize with a three-factor model that describes a new set of 48 global across-asset-class test assets, the Fama–French portfolios and a variety of hedge fund indices. Global funding liquidity risk is a partial source of these patterns, which are identifiable only when examining value and momentum jointly across markets.

Our findings present a challenge to existing behavioral, institutional and rational asset pricing theories that largely focus on U.S. equities. The strong correlation structure among value and momentum strategies across such diverse asset classes is difficult to reconcile under existing behavioral theories, for example. The high return premium and Sharpe ratio of a global across-asset-class diversified value and momentum portfolio presents an even more daunting hurdle for rational risk-based models to accommodate than the traditional approach of considering either value or momentum separately in a single asset market.

In further investigating the underlying economic sources driving value and momentum returns, we hope our simple three-factor framework can be useful for future research that is becoming increasingly concerned with pricing global assets across markets.



  • AQR Capital Management, LLC, (“AQR”) provide links to third-party websites only as a convenience, and the inclusion of such links does not imply any endorsement, approval, investigation, verification or monitoring by us of any content or information contained within or accessible from the linked sites. If you choose to visit the linked sites, you do so at your own risk, and you will be subject to such sites' terms of use and privacy policies, over which AQR.com has no control. In no event will AQR be responsible for any information or content within the linked sites or your use of the linked sites.

  • The information contained herein is only as current as of the date indicated, and may be superseded by subsequent market events or for other reasons. The views and opinions expressed herein are those of the author and do not necessarily reflect the views of AQR Capital Management, LLC, its affiliates or its employees.

    This information is not intended to, and does not relate specifically to any investment strategy or product that AQR offers. It is being provided merely to provide a framework to assist in the implementation of an investor’s own analysis and an investor’s own view on the topic discussed herein. Past performance is not a guarantee of future results.