A reexamination of factor momentum: How strong is it?

Fan, Minyou; Li, Youwei; Liao, Ming; Liu, Jiadong

Abstract

Recent studies show that most financial market anomalies exhibit a momentum effect. Based on two datasets, (i) an original 22-factor sample and (ii) a more comprehensive 187-factor sample, we find that factor momentum effect is weak at the individual factor level. In both samples, only about 22%– 27% of the factors exhibit strong return continuation and dominate the factor momentum portfolio while the remaining factors do not. The factor momentum strategies do not outperform the corresponding long-only strategies in either sample. The choice of factors affects the ability of factor momentum to explain individual stock momentum.

Citation

Fan, M., Li, Y., Liao, M., & Liu, J. (2022). A reexamination of factor momentum: How strong is it?. Financial Review, 57(3), 585-615. https://doi.org/10.1111/fire.12300

• Journal Article Type: Article
• Acceptance Date: Apr 5, 2022
• Online Publication Date: Jun 9, 2022
• Publication Date: 2022
• Deposit Date: Jun 9, 2022
• Publicly Available Date: Jun 10, 2022
• Journal: Financial Review
• Print ISSN: 0732-8516
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 57
• Issue: 3
• Pages: 585-615
• DOI: https://doi.org/10.1111/fire.12300
• Keywords: Factor momentum; Factor investing; Return continuation; Time series momentum
• Public URL: https://hull-repository.worktribe.com/output/4011219
• Publisher URL: https://onlinelibrary.wiley.com/doi/abs/10.1111/fire.12300