Factor Momentum and the Momentum Factor

52 Pages Posted: 7 Aug 2017 Last revised: 20 May 2018

See all articles by Sina Ehsani

Sina Ehsani

Saint Xavier University

Juhani T. Linnainmaa

USC Marshall School of Business; National Bureau of Economic Research (NBER)

Date Written: March 1, 2017

Abstract

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

Ehsani, Sina and Linnainmaa, Juhani T., Factor Momentum and the Momentum Factor (March 1, 2017). Available at SSRN: https://ssrn.com/abstract=3014521 or http://dx.doi.org/10.2139/ssrn.3014521

Sina Ehsani (Contact Author)

Saint Xavier University ( email )

Chicago, IL 60655
United States

Juhani T. Linnainmaa

USC Marshall School of Business ( email )

Marshall School of Business
Los Angeles, CA 90089
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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