For the decade from 2004-2013, the momentum premium—as measured by the Fama-French momentum factor—experienced a negative compound return of -1.2 percent per year. (This number was calculated using the monthly momentum premium figures from the Fama-French data series. Note that returns on factors are generally expressed as annual averages, not annualized returns, and during this decade the annual average premium was 1.8 percentage points.)
This decade-long period of poor performance has led many investors to ask whether the momentum premium has now permanently disappeared, because it’s become so well known and so many are now trying to exploit it.
While we cannot know the answer to the question of whether momentum has indeed disappeared for good (only time will provide the answer), we can look at the historical evidence to see if there have been other decade-long episodes of negative premiums. That might provide insight into whether the most recent period was truly unusual.
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