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.
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Momentum Library
Momentum and Trading Costs
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.
Momentum & Quality
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.
What’s Up with Japan?
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.
Insights
Rethinking Emerging Markets
Emerging markets have significantly lagged among global equities in the last several years. However, viewing the asset class through a wider lens, we see a very different picture. In this paper, we shine light on three key reasons to consider an allocation to emerging markets small cap to offset unintended risks and improve outcomes in a global portfolio.
Where do we go from here?
According to Axioma, the momentum factor just posted one of its best quarters on record in Q1 2024 in global equity markets.
The Case for Global Small Cap Equities
In this analysis, we explore the benefits of a dedicated allocation to global small cap equities. We discuss what factors have contributed to active managers’ consistent success over time and conclude with what style exposures have historically worked best in the global small cap universe.