In my introductory post on factor investing, one of the more popular factors is the momentum factor.
The momentum factor, is rather controversial.
On the surface, the economic drivers behind the momentum style are not clear. It makes little sense to buy a basket of stocks whose price is higher than a few months ago.
Eugene Fama wrote about it and thinks it is that kind of anomaly where the results show it works but fundamentally it is hard to agree with. Professor Robert Novy-Marx believes that what drives momentum is driven by strong earnings performances.
In general, some believed the momentum premium exist because behavorially many believed what goes up, cannot go up further. In a way, betting on momentum is betting on longer, intermediate term continuation.
The momentum style, along with the value style are two of the strongest factor styles out there. The factors show up over different time periods, across different regions, across different asset...