Abstract
We investigate the relationship between Value, Growth and two forms of Momentum across a wide range of developed and emerging international equity markets using MSCI total return ‘smart beta’ indices. As would be anticipated, Value generally beats Growth. A distinction is then made between relative momentum where assets are ranked according to their performance against each other, and absolute momentum (sometimes known as trend following) where assets are categorized according to whether they have recently exhibited positive nominal return characteristics. We find that both Value and Growth portfolios benefit from momentum filters but particularly the latter. When we overlay simple absolute momentum on these factor indices, it typically delivers a much more favourable investment performance than relative momentum with considerably lower volatility and smaller drawdowns. Overall, with the help of momentum-based investment rules, we find that Growth can outperform both comparable buy-and-hold and Value investment styles, a result that is almost certainly robust to transactions cost considerations.
| Original language | English |
|---|---|
| Pages (from-to) | 69-84 |
| Number of pages | 16 |
| Journal | Journal of Investing |
| Volume | 28 |
| Issue number | 5 |
| Publication status | Published - 1 Aug 2019 |