Factor Momentum and the Momentum Factor

Momentum in individual stock returns emanates from momentum in factor returns.Most factors are positively autocorrelated: the average factor earns a monthly return of 1 basis point following a year of losses and 53 basis points following a positive year.Factor momentum explains all forms of individual stock momentum.Stock momentum strategies indirectly time factors: they profit when the factors remain autocorrelated, and crash when these autocorrelations break down.Our key result is that momentum is not a distinct risk factor; it aggregates the autocorrelations found in all other factors.