The Science of Momentum

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The premier market anomaly is momentum. Stocks with low returns over the past year tend to have low returns for the next few months, and stocks with high past returns tend to have high future returns.

—Eugene Fama & Ken French 

For years, many believed momentum couldn’t exist. In theory, markets should price in all available information immediately. But the data told a different story. Study after study found that assets with strong recent performance tend to keep outperforming, at least for a while.

This consistent pattern raises an important question: Why?

The answer lies in how people behave. Investors are slow to react to new information. Some are skeptical. Others wait for confirmation. Many simply follow the herd. As a result, prices don’t adjust all at once, they drift. Good news takes time to be fully priced in, and that delay creates opportunity.

The research presented below has contributed to our increased understanding of momentum's role in financial market behavior:

Jegadeesh, Narasimhan, and Sheridan Titman. "Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency." Journal of Finance 48, no. 1 (1993): 65–91. [link]

Chan, Louis K. C., Narasimhan Jegadeesh, and Josef Lakonishok. "Momentum Strategies." The Journal of Finance 51, no. 5 (1996): 1681–1713. [link]

Lee, Charles M.C., and Bhaskaran Swaminathan. "Price Momentum and Trading Volume." The Journal of Finance 55, no. 5 (2000): 2017–2069. [link]

George, Thomas J., and Chuan-Yang Hwang. "The 52-Week High and Momentum Investing." Journal of Finance 59, no. 5 (2004): 2145–2176. [link]

Moskowitz, Tobias J., Yao Hua Ooi, and Lasse Heje Pedersen. “Time Series Momentum.” Journal of Financial Economics 104, no. 2 (2012) 228–250. [link]

Asness, Clifford S., Tobias J. Moskowitz, and Lasse Heje Pedersen. "Value and Momentum Everywhere." Journal of Finance 68, no. 3 (2013): 929–985. [link]

Asness, Clifford S., Andrea Frazzini, Ronen Israel, and Tobias J. Moskowitz. "Fact, Fiction, and Momentum Investing." Journal of Portfolio Management 40, no. 5 (2014): 75–92. [link]

Daniel, Kent D., and Tobias J. Moskowitz. "Momentum Crashes." Journal of Financial Economics 122, no. 2 (2016): 221–247. [link]

Hurst, Brian, Yao Hua Ooi, and Lasse Heje Pedersen. "A Century of Evidence on Trend-Following Investing." June 27, 2017. SSRN. [link]

Gupta, Tarun, and Bryan T. Kelly. "Factor Momentum Everywhere." Yale ICF Working Paper No. 2018-23, November 1, 2018. SSRN. [link]

Zaremba, Adam, and Jacob Shemer. "Is There Momentum in Factor Premia? Evidence from International Equity Markets." Research in International Business and Finance 46 (2018): 120–130. [link]

Ehsani, Sina, and Juhani T. Linnainmaa. "Factor Momentum and the Momentum Factor." The Journal of Finance 77, no. 3 (2022): 1877–1919. [link]

Fieberg, Christian, Daniel Metko, and Adam Zaremba. "Cross-Country Factor Momentum." Economics Letters 235 (2024): 111552. [link]

Goyal, Amit, Narasimhan Jegadeesh, and Avanidhar Subrahmanyam. "Empirical Determinants of Momentum: A Perspective Using International Data." Review of Finance 29, no. 1 (2025): 241–273. [link]