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Ben Carlson: The Pros & Cons Of Momentum Investing

TedTed
in Fund Discussions
FYI: Since I wrote this piece for Bloomberg in late-October there has been an additional 14 new all-time highs in the S&P 500. I’m often asked why the market continues to trudge higher in the face of so much uncertainty in the world. The simplest explanation is this idea of momentum. Momentum is by far the best performing academic risk factor in the markets historically, but it’s not always so easy to take advantage of and most investors don’t understand what it actually is. This piece takes a deep dive into what the momentum factor is and details some of the struggles the fund world has had in capturing its risk premium.
Regards,
Ted
http://awealthofcommonsense.com/2017/12/the-pros-cons-of-momentum-investing/

Comments

  • PBKCM
    edited December 2017
    "The momentum factor utilized by academics typically looks at the previous three, six or 12-month performance and buys the securities that have performed the best."

    Momentum strategies are very hard to build. It's a lot more complicated than the article suggests. And they are fraught with danger, as high-flying stocks can sell off hard.
  • MikeMMikeM
    The successful momentum investors I think of over the years here at MFO are Junkster, rono and Flack. Probably others too. I believe they have been very successful at it. Me , not so much. It's hard to duplicate someone else's strategy.
  • hank
    edited December 2017
    There’s more than one way to skin a cat - as they say.

    Interesting list @MikeM. I hadn’t thought much about it. I know @Junkster adheres to “trend persistency.”
    Yup. Sounds like momentum to me.
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