A Reexamination of Factor Momentum:How Strong is It?

The Financial Review, (2022). DOI: https://doi.org/10.1111/fire.12300

52 Pages Posted: 13 May 2021 Last revised: 10 Jun 2022

See all articles by Minyou Fan

Minyou Fan

Queen's University Belfast, Queen's Business School

Youwei Li

Hull University Business School

Ming Liao

Nankai University, The School of Finance

Jiadong Liu

Queen's University Belfast - Queen's Management School

Date Written: April 6, 2022

Abstract

Recent studies show that most financial market anomalies exhibit a momentum effect. Based on two datasets, i) an original 22-factor sample and ii) a more comprehensive 187-factor sample, we find that factor momentum effect is weak at the individual factor level. In both samples, only about 22-27% of the factors exhibit strong return continuation and dominate the factor momentum portfolio while the remaining factors do not. The factor momentum strategies do not outperform the corresponding long-only strategies in either sample. The choice of factors affects the ability of factor momentum to explain individual stock momentum.

Keywords: Time series momentum; Factor momentum; Return continuation; Factor investing.

JEL Classification: G11, G12

Suggested Citation

Fan, Minyou and Li, Youwei and Liao, Ming and Liu, Jiadong, A Reexamination of Factor Momentum:How Strong is It? (April 6, 2022). The Financial Review, (2022). DOI: https://doi.org/10.1111/fire.12300, Available at SSRN: https://ssrn.com/abstract=3844484 or http://dx.doi.org/10.2139/ssrn.3844484

Minyou Fan

Queen's University Belfast, Queen's Business School ( email )

Riddle Hall
185 Stranmillis Road
Belfast, BT9 5EE
United Kingdom

Youwei Li

Hull University Business School ( email )

University of Hull
Hull, HU6 7RX
United Kingdom

Ming Liao

Nankai University, The School of Finance ( email )

38 Tongyan Road
Haihe Education Park
Tianjin
China

Jiadong Liu (Contact Author)

Queen's University Belfast - Queen's Management School ( email )

Riddel Hall
185 Stranmillis Road
Belfast, BT9 5EE
United Kingdom

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