Value and Momentum Everywhere

Abstract

We find consistent value and momentum return premia across eight diverse markets and asset classes, and a strong common factor structure among their returns. Value and momentum returns correlate more strongly across asset classes than passive exposures to the asset classes, but value and momentum are negatively correlated with each other, both within and across asset classes. Our results indicate the presence of common global risks that we characterize with a three-factor model. Global funding liquidity risk is a partial source of these patterns, which are identifiable only when examining value and momentum jointly across markets. Our findings present a challenge to existing behavioral, institutional, and rational asset pricing theories that largely focus on U.S. equities.TWO OF THE MOST studied capital market phenomena are the relation between an asset's return and the ratio of its "long-run" (or book) value relative to its current market value, termed the "value" effect, and the relation between an asset's return and its recent relative performance history, termed the "momentum" effect. The returns to value and momentum strategies have become central to the market efficiency debate and the focal points of asset pricing studies, generating numerous competing theories for their existence. We offer new insights into these two market anomalies by examining their returns jointly across eight diverse markets and asset classes. We find significant return premia to value and momentum in every asset class and strong comovement of their returns across asset classes, both of which challenge existing theories for their existence. We provide a simple three-factor model that captures the global returns across asset classes, the Fama-French U.S. stock portfolios, and a set of hedge fund indices.

Short-Term Momentum Effect: a Case of Middle East Stock Markets

“…While mentioning about the contribution of this paper, they wrote that they have produced out of sample results about existence of momentum effect and the results produced by this paper further strengthen the international evidence of existence of short term momentum effect as it was previously documented by Griffin et al (2003) and Rouwenhorst (1998Rouwenhorst ( , 1999. Frontier cum emerging market is isolated markets and short term momentum effect exis ted everywhere as stated by Asness et al (2009). Their sam ple period started from January, 1997 and ended on November 2008.…”

Robust Portfolio Control with Stochastic Factor Dynamics

“…Erb and Harvey (2006) documented the 1-year momentum factor in commodity futures prices. Asness et al (2013) and Moskowitz et al (2012) documented 1-year and 5-year many asset classes.…”

Passive Implementation of Factor Diversification Strategies

“…For example, Asness et al [2009] show that a momentum-value diversification strategy, based on long-short factor portfolios, produces superior performance compared with the individual momentum and value factors. The outperformance comes from the diversification benefits that can be realized by exploiting the generally negative excess return correlation between momentum and value.…”