Decomposing Factor Momentum

62 Pages Posted: 6 Feb 2020 Last revised: 30 Mar 2020

Date Written: March 29, 2020


The factor momentum portfolio return does not stem from momentum in factor returns. In empirical studies, the factor momentum portfolio is decomposed into a factor timing portfolio and a quasi-buy-and-hold portfolio, where the former dynamically collects the benefit due to factor return autocorrelations and the latter statically collects factor premiums. Evidence from 210 stock return factors reveals that the quasi-buy-and-hold portfolio robustly accounts for a dominant fraction of the factor momentum return and outperforms in risk-adjusted returns, whereas factor return predictability is empirically too weak to produce timing benefits. The quasi-buy-and-hold portfolio survives the post-publication decline of factor returns but the factor momentum portfolio does not.

Keywords: factor momentum, time-series predictability, cross-sectional dispersion

JEL Classification: G11, G12, G17

Suggested Citation

Yang, Hanlin, Decomposing Factor Momentum (March 29, 2020). Available at SSRN: or

Hanlin Yang (Contact Author)

University of Zurich ( email )

Plattenstrasse 14
Zürich, 8032

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