Dissecting Anomalies

  • August 24, 2020

Fama and French’s 2008 paper, “Dissecting Anomalies,” outlined their study that found sizeable annualized premiums for various investment factors. The study called momentum “the premier anomaly” stating, “The premier anomaly is momentum: stocks with low returns over the last year tend to have low returns while stocks with high past returns tend to have higher future returns.” Higher momentum stocks saw a 60% higher return versus the broader universe with only a 19% higher standard deviation, a very favorable risk-reward tradeoff. Additionally, momentum produced strong returns for all size groups in both cap-weighted and equal-weighted terms.