Momentum strategies inherently involve frequent trading, raising questions about the potential erosion of alpha due to implementation costs. This paper explores the relationship between momentum investing and trading costs by examining the sources and measurement of these costs, reviewing pertinent academic literature, discussing practical implementation solutions, and providing our own evidence supporting the survival of the momentum premium despite trading costs.

Academic research, including our own, has shown that momentum and quality factors have generated positive excess returns above an equity market portfolio. This paper looks at the relationship between long-only momentum and quality across different sub-segments of global equity markets. We also share insight on what is an ‘optimal’ mix of momentum, quality, value, and growth within each market.

While momentum is widely acknowledged as a robust and persistent driver of excess returns in global equity markets, Japan presents an intriguing case that may diverge from this trend. This analysis contributes to the ongoing debate surrounding momentum in Japan, shedding light on the intricacies of market dynamics and portfolio construction.

Across a diverse set of global equities and multiple market capitalizations, we conducted an analysis of 32 distinct long-only factors, including momentum, value, growth, quality, and the market. These findings collectively underscore the robust and reliable performance of momentum as a factor in global equity markets.

The small cap premium’s significance seems to have diminished over time and the underlying cause remains uncertain. This study looks at incorporating momentum exposure within the small cap universe to potentially offer a more reliable approach to generating alpha in small cap.

Since 1992, the Style Box framework has been used for portfolio diversification and to improve investment outcomes. This paper challenges that popular construct, highlighting momentum as a worthy stand-alone alpha source, or a substitute to traditional growth.

This is a follow-on to our earlier paper Momentum Crashes: The Long & the Short of It. In this short piece, we highlight the historical significance of two recent momentum crashes that occurred in November 2022 and January 2023. We also note that coming out of periods like this, historically long-only momentum has done quite well.

There is a common notion that a momentum strategy carries higher risk than that of a value strategy. This analysis puts that idea to the test using nearly 100 years of data and various risk measures. In this paper, we discuss the potential reasons for this misconception and show evidence that momentum has lower realized risk than value over time, while outperforming meaningfully.

This analysis shows the impact to a momentum-based investment strategy from different rebalancing frequencies. Our research suggests that turning the portfolio often is necessary to harvest the momentum premium consistently through time – thus placing turnover and implementation costs as key considerations in any successful momentum strategy.

A consistent pushback against momentum is the strategy’s susceptibility to short, sharp periods of underperformance. In this paper, we analyze some of the worst momentum crashes in history to discover how these periods of underperformance can be nearly fully mitigated.

Momentum and growth do have positive excess return correlations over time; however, in this paper we describe the ways in which the two styles are inherently different, leading to very different outcomes over time.

Our research and that of others finds the momentum premium to be robust, persistent through time and pervasive across asset classes. In this paper, we discuss reasons for the momentum premium, as well as how to use a momentum strategy as part of a diversified portfolio.

Momentum and value tend to be opposites - one outperforming, while the other underperforms. This negative correlation provides strong diversification benefits to investors, along with long-term alpha. While they are much different strategies with different return patterns over the long term, that doesn’t mean that they don’t converge at times.