Factor Momentum and the Momentum Factor
76 Pages Posted: 7 Aug 2017 Last revised: 12 May 2020
Date Written: May 12, 2020
Momentum in individual stock returns emanates from momentum in factor returns. Most factors are positively autocorrelated: the average factor earns a monthly return of 6 basis points following a year of losses and 51 basis points following a positive year. We find that factor momentum concentrates in factors that explain more of the cross section of returns and that it is not incidental to individual stock momentum: momentum-neutral factors display more momentum and momentum in firm-specific residuals appears to capture momentum in omitted factors. Our key result is that momentum is not a distinct risk factor; it times other factors.
Keywords: Anomalies; Autocorrelation; Factors; Momentum
JEL Classification: G11; G12; G40
Suggested Citation: Suggested Citation