Momentum Versus Factor Momentum: Which Dominates?

New research shows that investors can profit by exploiting “momentum” – the notion that stocks or factors that experienced good performance will continue to do so, and vice versa.

The momentum effect is one of the most persistent, pervasive and robust anomalies documented. In our book, Your Complete Guide to Factor-Based Investing, Andrew Berkin and I presented the empirical evidence of a momentum premium across stocks, bonds, commodities and currencies. Recently, factor momentum has received much attention from researchers.

Factor momentum

The empirical research on factor momentum, including the 2018 studies, “Factor Momentum Everywhere,” and “Is there Momentum in Factor Premia? Evidence from International Equity Markets”; the 2019 studies, “Factor Momentum and the Momentum Factor,” and “Factor Momentum”; the 2021 study, “Is Factor Momentum More than Stock Momentum?”; the 2022 studies, “Momentum-Managed Equity Factors,” and “Factor Momentum in the Chinese Stock Market,” have examined whether momentum can be found in factors as well, and found: