Factor Momentum and the Momentum Factor
52 Pages Posted: 7 Aug 2017 Last revised: 20 May 2018
Date Written: March 1, 2017
We document a strong factor momentum effect. Profits of time series and cross-sectional momentum strategies are large and significant across well-known anomalies and factors. Positive autocovariance in factor returns is the essential component of factor momentum profits and plays a key role in producing the profits of the cross-sectional equity momentum strategy. Although factor autocorrelation is mostly positive, it occasionally turns negative and causes equity momentum to crash. We show that time series autocorrelation in factor returns fully subsumes the cross-sectional momentum in individual stock returns.
Keywords: Anomalies; Autocorrelation; Factors; Momentum
JEL Classification: G11; G12; G40
Suggested Citation: Suggested Citation