A0500
Title: Facts, momentum and factor momentum
Authors: Haoxu Wang - National University of Singapore (Singapore)
Pedro Barroso - Universidade Catolica Portuguesa (Portugal) [presenting]
Abstract: Factor momentum recently joined the ongoing debate over the causes of stock momentum. According to this explanation, momentum in well-known off-the-shelf factors - or in principal component factors responsible for large commonalities in stock returns - greatly subsumes momentum in individual stocks. It is found that neither form of factor momentum can explain any previously proposed momentum driver; conversely, all other drivers combined can subsume both forms of factor momentum. Also, compared to previous drivers, factor momentum does not exhibit superior performance in capturing other momentum-like anomalies. Like the competing models, it cannot explain stock momentum conditionally. Moreover, it cannot explain stock momentum after accounting for transaction costs, while these can explain the persistence of factor momentum, especially in less systematic factors.
