Factor Momentum and the Momentum Factor

Sina Ehsani and Juhani T. Linnainmaa

Journal of Finance, 2022, vol. 77, issue 3, 1877-1919

Abstract: Momentum in individual stock returns relates to momentum in factor returns. Most factors are positively autocorrelated: the average factor earns a monthly return of six basis points following a year of losses and 51 basis points following a positive year. We find that factor momentum concentrates in factors that explain more of the cross section of returns and that it is not incidental to individual stock momentum: momentum‐neutral factors display more momentum. Momentum found in high‐eigenvalue principal component factors subsumes most forms of individual stock momentum. Our results suggest that momentum is not a distinct risk factor—it times other factors.

Date: 2022
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