Happy New Year! In case you missed them, here are our most popular posts in 2018: Extended Backtest of Global Equity Momentum My book had dual momentum results from 1974 through 2013. With the acquisition of additional data, we are now able to show results back to 1950. We also explain why 1950 is a…
Momentum is one of the most researched topics in financial market literature. A search of the SSRN database on momentum will turn up 1000 papers written over the past three years and 3000 papers in total. With so much information available, it is not surprising that many analysts have missed seeing some of the research. Their…
Like most investors, those using momentum are often guilty of chasing performance. In fact, momentum requires that we do this. But it should be done in a disciplined and systematic way. Performance chasing should not be due to myopia, irrational loss aversion, or other psychological biases. Behavioral Challenges It is not always easy adhering to a disciplined…
As with many people these days, most of my investment information comes from the internet. It has taken me years to compile a group of research-oriented blogs and websites that I have found most useful. Here is my annotated list: Investment Blogs Quantocracy: This is an aggregator of quantitative trading links to blog posts and…
One of the most popular research papers on momentum is “Value and Momentum Everywhere” by Asness, Moskowitz, and Pedersen. I have an earlier post that discussed that paper. However, one important item slipped by me then. It was a statement by the authors that value and momentum premiums are negatively correlated. They cited a negative monthly…
Dead or dying academic ideas latched on to by unwary institutional investors litter the investment graveyard landscape. My new book, Dual Momentum Investing: An Innovative Strategy for Higher Returns with Lower Risk, describes some of these, such as portfolio insurance, small-cap premium, and portfolio diversification with passive commodities. Most of these occurred because of incomplete information…
The AQR posse (Asness, Frazzini, Israel, and Moskowitz) recently issued a working paper that disproves many often-repeated myths about momentum investing, particularly as it applies to individual stocks. The authors back up their reasoning with results from academic papers and publicly available data. Here are the myths they address: The momentum anomaly is small and sporadic ·It…
A number of papers have aimed at improving relative strength momentum with equities by adding enhancements to it such as analyst coverage, credit rating, business cycle placement, proximity to 52- week highs, and price acceleration. Li-Wen Chen and Hsin-Yi Yu have an interesting new paper called “Investor Attention, Visual Price Pattern, and Momentum Investing” that identifies price…
In 1967, Bob Levy came up with the term relative strength in his paper “Relative Strength as a Criterion for Investment Selection.” He soon afterward wrote a book called The Relative Strength Concept of Stock Price Forecasting. Levy showed that stocks that outperformed the market over a pre-specified time period exhibited performance that tended to persist.…