A Persistent Kind Of Momentum

Time-series momentum examines the trend of an asset with respect to its own past performance. This is very different than cross-sectional momentum (often referred to as Carhart momentum), which compares the performance of an asset with respect to the performance of another asset.

Ian D’Souza, Voraphat Srichanachaichok, George Jiaguo Wang and Chelsea Yaqiong Yao, who authored the 2016 study “The Enduring Effect of Time-Series Momentum on Stock Returns Over Nearly 100 Years,” provide evidence that supports the view that time-series momentum (also referred to as trend-following) is one of the few investment factors that meet five important criteria for inclusion in a portfolio; specifically, it is persistent, pervasive, robust, investable and intuitive. Their study covered the 88-year period from 1927 to 2014.

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