Why aren’t more of us simple momentum investors? I ask because in the last five years my no-thought momentum portfolio has more than doubled, which means it has out performed all but one unit trust in Trustnet’s database of all companies funds – the exception being Chelverton’s UK equity growth fund.
Most, funds, therefore, have missed a very simple trick. Why?
It’s not because they didn’t know about the success of momentum strategies. The fact that past winners continue to beat the market was first pointed out for US stocks back in 1993 by Narasimhan Jegadeesh and Sheridan Titman in the Journal of Finance, the leading journal of financial economics. Since then, economists have found that momentum works in European markets; in Asian ones (other than Japan); in Victorian England; in 19th century America; in commodities; and in currencies. “The existence of momentum is a well-established empirical fact” wrote AQR Capital Management’s Clifford Asness in 2014.