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Factor Momentum

Author

Listed:
  • Robert D Arnott
  • Vitali Kalesnik
  • Juhani T Linnainmaa
  • Tarun Ramadorai

Abstract

Factors display strong cross-sectional momentum that subsumes momentum in industries and other portfolio characteristics. The profits of all these momentum strategies—based on factors, industries, and other characteristics—significantly correlate with each other and therefore likely emanate from the same source. If factors display momentum, so will any set of portfolios with cross-sectional variation in factor loadings. Consistent with factors being at the root of momentum, we find that momentum in industry-neutral factors explains industry momentum, but industry momentum explains none of the factor momentum. Cross-sectional factor momentum concentrates in the first few highest-eigenvalue factors and is distinct from time-series factor momentum.Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Suggested Citation

  • Robert D Arnott & Vitali Kalesnik & Juhani T Linnainmaa & Tarun Ramadorai, 2023. "Factor Momentum," The Review of Financial Studies, Society for Financial Studies, vol. 36(8), pages 3034-3070.
    • Handle: RePEc:oup:rfinst:v:36:y:2023:i:8:p:3034-3070.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhad006
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    More about this item

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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