Factor Momentum Everywhere

32 Pages Posted: 31 Dec 2018

See all articles by Tarun Gupta

Tarun Gupta

AQR Capital Management, LLC

Bryan T. Kelly

Yale SOM; AQR Capital Management, LLC; National Bureau of Economic Research (NBER)

Date Written: November 1, 2018

Abstract

In this article, the authors document robust momentum behavior in a large collection of 65 widely studied characteristic-based equity factors around the globe. They show that, in general, individual factors can be reliably timed based on their own recent performance. A time series “factor momentum” portfolio that combines timing strategies of all factors earns an annual Sharpe ratio of 0.84. Factor momentum adds significant incremental performance to investment strategies that employ traditional momentum, industry momentum, value, and other commonly studied factors. Their results demonstrate that the momentum phenomenon is driven in large part by persistence in common return factors and not solely by persistence in idiosyncratic stock performance.

Keywords: factor momentum, time series momentum, stock price momentum

Suggested Citation

Gupta, Tarun and Kelly, Bryan T., Factor Momentum Everywhere (November 1, 2018). Available at SSRN: https://ssrn.com/abstract=3300728 or http://dx.doi.org/10.2139/ssrn.3300728

Tarun Gupta

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

Bryan T. Kelly (Contact Author)

Yale SOM ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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