AQR explores how momentum extends beyond individual stocks into the factors that drive returns, arguing that factor performance itself follows persistent trends. The paper shows that timing factors based on recent returns can enhance outcomes, challenging the view that momentum is purely stock-level.
Factor Momentum Everywhere
AQR
Tarun Gupta, Bryan Kelly
Research
31 Pages
Key Takeaways
Factor Momentum Persistence: Across 65 factors, those with positive recent returns continue outperforming, demonstrating consistent return continuation across global equity markets.
Sharpe Ratio Improvement: A combined factor timing strategy delivers a 0.84 Sharpe ratio, exceeding traditional factor and stock momentum approaches on a risk-adjusted basis.
Explains Stock Momentum: Factor momentum captures a large share of stock momentum behavior, indicating that common factors, not individual securities, drive much of the effect.
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