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Equity Factor Investing: Momentum

In: Index Fund Management

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  • Fadi Zaher

    (Index Solutions & Investment Specialists)

Abstract

Momentum investing is one of the most popular investing styles among professional investors. The simplest explanation for this is that rising prices attract buyers and falling prices attract sellers. Most of the time when stocks are going up in price people tend to crowd into the market at any price. Due to the simplistic nature of momentum, it has been deployed for decades by many in the finance industry including mutual funds and hedge funds. This chapter offers insights into the equity momentum factor investing. It provides an overview of rules-based approaches and types of momentum factors. Further, it describes why a momentum factor has been historically rewarded due to market structures and behavioural reasons. This factor has developed tremendously aided by abundant research over the last few decades and has been broadly adopted in many index funds today.

Suggested Citation

  • Fadi Zaher, 2019. "Equity Factor Investing: Momentum," Springer Books, in: Index Fund Management, chapter 7, pages 117-133, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-19400-0_7
    DOI: 10.1007/978-3-030-19400-0_7
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