NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Factor Momentum and the Momentum Factor

Sina Ehsani, Juhani T. Linnainmaa

NBER Working Paper No. 25551
Issued in February 2019
NBER Program(s):Asset Pricing

Momentum in individual stock returns emanates from momentum in factor returns. Most factors are positively autocorrelated: the average factor earns a monthly return of 1 basis point following a year of losses and 53 basis points following a positive year. Factor momentum explains all forms of individual stock momentum. Stock momentum strategies indirectly time factors: they profit when the factors remain autocorrelated, and crash when these autocorrelations break down. Our key result is that momentum is not a distinct risk factor; it aggregates the autocorrelations found in all other factors.

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Document Object Identifier (DOI): 10.3386/w25551

 
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