01 Oct Learning From Research Affiliates' "Hot Potato: Momentum as an Investment Strategy"

Relative Momentum is a viable complementary investment strategy to a traditional portfolio.

In this article, Absolute Momentum will be used interchangeably with trend following or time series momentum. Relative Momentum will be used interchangeably with cross-sectional momentum or relative strength.

Relative Momentum and Value Investing are opposites in various aspects. Relative Momentum is  pro-cyclical, works well over a relatively short term period of 1 year and based on trending markets while value investing is contrarian, works well over a relatively longer term period of 5-7 years and is mean reverting. These differences in characteristics made the two strategies complementary.

Research Paper: Hot Potato: Momentum as an Investment Strategy

Author: Ryan Larson, CFA

Company: Research Affiliates