O’Shaughnessy Asset Management explores how momentum investing works in practice, focusing on how behavioral biases and trend persistence can be systematically captured in equity portfolios. The paper argues momentum is not just noise but a persistent anomaly, though it becomes more effective when paired with other factors like value. It also challenges the idea that momentum alone is sufficient, emphasizing multi-factor integration.
The Factor Archives: Momentum
O’Shaughnessy Asset Management
Jamie Catherwood
Research
9 Pages
Key Takeaways
Behavioral Bias Drives Returns: Momentum strategies exploit investor underreaction and herding, with studies showing excess returns persisting across decades and multiple global markets.
Multi Factor Enhancement: Combining momentum with value improves outcomes, with blended strategies historically outperforming standalone factors by several percentage points annually over long horizons.
Trend Persistence Evidence: Stocks with strong past performance continue outperforming over 6–12 month horizons, while poor performers lag, reinforcing momentum’s empirical durability.