Momentum Has Not Been 'Overgrazed': A Visual Overview in 10 Slides
10 Pages Posted: 12 May 2014
Date Written: May 10, 2014
The return to "momentum" does not seem to be the victim of “overgrazing”. Conceptually, overgrazing occurs when too much capital chases too few investment opportunities which in turn leads to low returns. The “equity risk premium”, the “size premium” and the “value premium” seem to be getting close to a no-man’s land of return-free risk. A high degree of belief in “the kindness of strangers” could be driving the low equity risk premium, size premium and value premium. A high degree of disbelief in momentum could be driving what appears to be a trend large cap momentum excess return of about 7%.
Keywords: overgrazing, Garrett Hardin, equity risk premium, size premium, value premium, momentum return, Street Car Named Desire, have to believe it to see it
JEL Classification: G10, G11, G12, G15, G28, E58, N20
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