Management Review Quarterly

https://doi.org/10.1007/s11301-020-00205-6

Momentum investing: a systematic literature review

and bibliometric analysis

Simarjeet Singh1   · Nidhi Walia1 

Received: 15 December 2019 / Accepted: 23 October 2020

© Springer Nature Switzerland AG 2020

Abstract
This comprehensive research study aims to highlight the evolution of momentum
investing research and identify the mature and emerging themes in momentum
investing. This study reviews 532 research studies published between 1993 and
2019. The study uses a combination of various bibliometric and network analy-
sis tools to identify the most influential research studies, key journals and leading
authors. Bibliometric and network analysis also help in the broader classification of
research studies into four major categories. Further, a rigorous investigation of these
research studies identifies various loopholes and propose actionable themes for next-
generation research.

Keywords  Momentum investing · Bibliometric analysis · Citation analysis · Content

analysis

JEL Classification  G1 · G3 · G12 · G14

1 Introduction

Earlier in 1970, financial researchers believed that stock prices follow random walk
(Kassouf 1968; Fama 1970; Leuthold 1972; Solnik 1973). They believed that any
apparent pattern in the stock prices is the result of data snooping and past informa-
tion cannot be used to predict future stock prices. These kinds of views reflect the
idea of the efficient market hypothesis proposed by Fama (1970). Nevertheless, in
the last 25  years, this hypothesis has faced a lot of criticism in the form of vari-
ous market anomalies (Basu 1983; Jegadeesh and Titman 1993; Sloan 1996; Heston
et  al. 1999; Chan and Lakonishok 2004). Out of these anomalies, momentum has

* Simarjeet Singh
[email protected]
Nidhi Walia
[email protected]
1
University School of Applied Management, Punjabi University, Patiala, India

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 S. Singh, N. Walia

gained maximum attention both from financial researchers and industry practitioners
(Blitz et al. 2020). The popularity of the momentum can be judged from the fact that
Eugene Fama termed it as “premier anomaly”. In simple words, momentum means
the continuation of the trend (Zaremba and “Koby” 2018). Initially, Levy (1967)
introduces the term “relative strength” as an earlier form of momentum. However,
the momentum got attention after the influential work of Jegadeesh and Titman
(1993) titled “Returns to Buying Winners and Selling Losers: Implications for Stock
Market Efficiency”. Jegadeesh and Titman (1993) notice that stocks with higher past
returns continue to have the superior future return over the next 3–12 months and
stocks with lower past returns continue to exhibit lower future returns over the next
few months. They suggest that by buying past winners and selling past losers, inves-
tors can earn significant profits.
Academic studies have proved the efficacy of momentum strategies across differ-
ent geographical markets and asset classes (Rouwenhorst 1998; Griffin et al. 2003;
Chui et  al. 2010; Menkhoff et  al. 2012; Asness et  al. 2013; Bianchi et  al. 2015).
Research studies also explore various explanations and sources of momentum effect
(Daniel et al. 1998; Conrad and Kaul 1998; Hong and Stein 1999; Lee and Swami-
nathan 2000; Cooper et al. 2004; Grinblatt and Han 2005). Traditional momentum
strategies have faced much criticism after the subprime crisis, as these conventional
investment strategies performed miserably during that period (Daniel and Moskow-
itz 2016; Fan et al. 2018; Demirer and Zhang 2019). Therefore, after the subprime
crisis, researchers shifted their focus and tried to find out ways to enhance the per-
formance of momentum investment strategies (Blitz et  al. 2011; Moskowitz et  al.
2012; Barroso and Santa-Clara 2015; Wang and Xu 2015).
Existing literature reviews concentrate on one or two aspects of momentum
investing. For instance, some studies focus on explanations of momentum prof-
its (Galariotis 2014; Subrahmanyam 2018) while other studies stress on review-
ing research studies related to a particular country (Yang et al. 2019). The present
study narrows this gap by conducting a more comprehensive review. The study has
given special emphasis to research studies related to alternative momentum strat-
egies. Alternative momentum has remained a core theme in momentum investing
after the subprime crisis (Singh et al. 2020). This paper has considered 532 research
papers for bibliometric analysis and 195 research papers for content analysis. In our
knowledge, this is the first review study in the investment management literature that
adopts a coalition of bibliometric and content analysis. By taking into consideration
an extended period (1993–2019), the present study delivers a comprehensive review
about the evolution of momentum investing. The current study will be a detailed
roadmap for new researchers in momentum investing as it offers a unique set of
future research directions.
The study begins by conducting an in-depth literature review. Further, authors
have performed bibliometric and network analysis to identify various renowned and
emerging themes of momentum investing. Lastly, the study has used content analy-
sis to refine existing understanding about the established research themes and pro-
pose future research areas.
Our study contributes to the momentum investing literature in multiple ways.
First, the present study is the first comprehensive literature review covering all the

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Momentum investing: a systematic literature review and…

significant aspects of this significant theme in investment management. Second, this

is one of the earliest studies in finance literature that uses the trio of bibliometric,
network and content analysis. It also contributes to the methodology of the system-
atic literature review method. Finally, our study provides an organised knowledge
structure for momentum investing. Based on this structure, we have proposed poten-
tial ideas for further research.
Authors have arranged the remaining paper as follows. Section  2 outlines the
structured methodology. In Sect.  3, the authors report the findings of bibliometric
and network analysis. We conduct content analysis of eminent research studies in
the next section. Section 5 examines the results of all the analysis, report significant
insights and propose many areas for future research. The last section concludes the
paper.

2 Research methodology

The present study employs the systematic methodological approach suggested by

Tranfield et al. (2003) to ensure objective, reproducible and comprehensive cover-
age of literature. Structured reviews help in mapping the present state of the art and
identification of potential research gaps in a particular field (Tranfield et al. 2003;
Rousseau et al. 2008; Cai and Lo 2020). Authors discuss the complete methodologi-
cal process in the following sub-sections.

2.1 Literature retrieval and selection

2.1.1 Search strategy

The research study uses electronic database searching along with backward and for-
ward reference searching as this combined approach ensures the inclusion of all rel-
evant studies (Eduardsen and Marinova 2020). The present study uses Scopus bib-
liometric database. Scopus covers a wide range of academic resources on finance,
and it is popular among the researchers (Fahimnia et al. 2015; Martínez-López et al.
2018; Baas et al. 2020). To mitigate the probability of omission of relevant research
studies, we have identified all the relevant keywords related to momentum investing
and divide these keywords into the following two groups.
Group 1 includes keywords related to momentum investing such as “momentum
effect”, “cross-sectional momentum”, “52-week high momentum”, “time-series
momentum”, “risk-managed momentum”, “industrial momentum”, “idiosyncratic
momentum”, “dual momentum”, “absolute momentum”, “relative momentum”,
“residual momentum”.
Group 2 includes keywords related to financial markets, financial assets and other
miscellaneous keywords such as “equity markets”, “emerging markets”, “international
markets”, “bonds”, “commodities”, “currencies”, “cryptocurrencies”, “exchange-
traded funds”, “mutual funds”, “real estate investment trusts”, “explanations”,
“sources”, “firm size”, “capital investment”, “credit ratings”, “dividend”, “idiosyncratic

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 S. Singh, N. Walia

volatility”, “turnover”, “market states”, “liquidity”, “investor sentiments”, “macroeco-

nomic variables”.
The study uses various combinations of keywords from group 1 and group 2 to run
the search queries. Apart from trying various combinations, the study also runs stan-
dalone search queries using the keywords in group 1. We retrieve 1823 research records
in the initial search.

2.1.2 Selection of studies

To ensure the inclusion of relevant research studies, the study establishes the following
inclusion criteria (IC): IC 1, the study will consider the peer-reviewed research stud-
ies (Ponomarev et al. 2014; Bailey et al. 2017; Fisch and Block 2018); IC 2, research
papers in the finance domain will be acknowledged; and IC 3, the present study will
incorporate the research papers written in English. After applying the above mentioned
ICs, authors receive 864 results. Further, the present study applies a two-step proce-
dure to identify relevant studies. The first step includes preliminary screening where
the reviewer 1 reviews the titles, keywords, and abstracts of the documents, to decide
upon its candidature for the present study. In the second step, the documents that pass
the initial screening go through the deep screening (reading full-text) to decide upon its
inclusion in the final dataset. Out of the 864 records examined, 502 studies passed the
initial qualitative inspection, and 418 studies passed the full-text check; hence included
in the final corpus of studies. In order to ensure the incorporation of all significant arti-
cles, we also apply forward and backward referencing approach and identify 114 addi-
tional research studies. Finally, we have 532 research studies published between 1993
and 2019 for bibliometric analysis.

2.2 Data analysis

The study employs bibliometric analysis on these selected papers. The bibliometric
analysis consists of various evaluative and relational techniques to identify influential
authors, journals and research studies on a particular field and highlight the intellectual
and social structure of that field (Dzikowski 2018; Bhatt et  al. 2020). Various open-
source software tools are available for bibliometric analysis such as Bibexcel, Biblio-
metrix, CiteSpace, Histcite, Sitkis and ScientoPy. The present study uses Bibliometrix
R package (3.0.1) for preliminary bibliometric analysis. The present study also utilises
BibExcel (1.0) to prepare the required input data for network analysis. Several open-
source tools such as Gephi, Pajek, SciMat and VOSviewer are available for network
analysis. We have chosen Gephi (0.9.2) over other network analysis tools due to its
advanced filtering capabilities and specialised clustering capabilities.

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Momentum investing: a systematic literature review and…

Fig. 1  Publishing trend in the area of momentum investing

3 Bibliometric and network analysis

3.1 Chronological publication trend

Figure 1 depicts the annual publication trend of the research studies on momen-
tum investing. First relevant study on momentum investing appears in 1993. It
is evident from the figure that the publication trend has been relatively stagnant
in the initial years (1993–2001). However, from the year 2002, there has been a
significant increase in the number of publications. Especially in the last 10 years,
momentum investing has witnessed exponential growth, as approximately 70% of
the total papers published in these 10 years. This rapid growth indicates the rising
popularity of momentum investing among financial academicians. Further, the
study also fit a linear trend line which indicates a significant relationship between
the annual number of publications and the publication years.

3.2 Journal quality analysis

Initial results reveal that 113 journals contribute 532 research papers in the
momentum investing literature. The contribution of the top 10 journals in total
momentum literature is 34%. Table 1 represents the top 10 journals contributing
to momentum investing literature along with their key characteristics. One can
easily observe from the table that Journal of Banking and Finance (JBF) leads in
terms of the number of publications. However, Journal of Finance (JF) is the most
influential journal as the journal has the highest number of total citations, and this
journal has contributed first publication on momentum investing. Journal is still
contributing to momentum investing literature. Journal of Financial Economics
(JFE) and Review of Financial Studies are among the other influential journals.

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 S. Singh, N. Walia

Table 1  Top 10 journals contributing to momentum investing

Journal (label) Total articles H index TC TC/A Time span

Journal of Banking and Finance (JBF) 33 14 764 23.15 2002–2019

Journal of Finance (JF) 27 25 21134 782.70 1993–2019
Journal of Financial Economics (JFE) 21 17 4589 218.50 1998–2019
Pacific Basin Finance Journal (PBFJ) 20 11 476 23.80 2002–2019
Journal of Empirical Finance (JEF) 16 10 403 25.20 2003–2019
Journal of Financial and Quantitative 14 11 818 58.50 2000–2018
Analysis (JFQA)
Review of Financial Studies (RFS) 14 13 1710 122.10 1998–2018
Applied Financial Economics (AFE) 14 6 86 6.15 2005–2014
Accounting and Finance (AF) 12 5 79 6.58 2007–2019
Journal of Asset Management (JAM) 12 5 54 4.50 2008–2019

Fig. 2  Geographical locations of all contributing organizations

3.3 Leading countries, regions and organisations driving research on momentum

investing

To determine the leading countries driving research on momentum investing, the

present study extract affiliations of authors from the comma separated value (CSV)
file in Google sheets. After this, authors derive the GPS coordinates of these affili-
ations with the help of the Geocode tool in Google Sheets. Finally, the study plots
these coordinates through Google Maps. Figure 2 discloses that North America and
Europe are two continents which contribute the highest number of research studies

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Momentum investing: a systematic literature review and…

Table 2  Contribution of Geographical region No. of organi- Contribution in

organizations based on their zations percentage (%)
geographical regions
Europe
Northern Europe 24 2.33
Eastern Europe 17 1.65
Western Europe 203 19.71
Southern Europe 33 3.20
America
Northern America 358 34.76
South America 4 0.39
Africa
Northern Africa 2 0.19
Southern Africa 9 0.87
North Western Africa 5 0.48
Asia
Eastern Asia 184 17.86
South-Eastern Asia 32 3.11
Western Asia 14 1.36
Southern Asia 34 3.30
Oceania
Australia And New Zealand 111 10.78
Total 1030 100.00

in momentum investing literature. In contrast, the contribution of South American

and African countries is minimal.
Additionally, in Table 2, the study subdivides the four major geographical areas
into regions and report the contribution of each region. North America, Western
Europe, along with Eastern Asia, are the major regions contributing to momentum
investing literature. African regions, along with South America and Western Asia,
are the least contributing regions. Further, Table  3 reports the leading organisa-
tions working in the field of momentum investing. Monash University, University
of Delhi, California State University and Emory University are among the top-per-
forming institutions.

3.4 Author influence

Table 4 represents the dominant authors working in the area of momentum invest-
ing. It is apparent from the table that Ko and Zaremba lead in terms of the total
number of publications. Nevertheless, Jegadeesh and Titman are the most promi-
nent authors, as both authors receive the highest number of citations. Jegadeesh and
Titman also dominate with regard to h and g indexes. This dominance is primarily
due to the fact that Jegadeesh and Titman are the earliest contributors to momentum
investing.

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 S. Singh, N. Walia

Table 3  Top 10 contributing organizations

Organization Location Total articles

Monash University Australia 9

University of Delhi India 9
California State University United States of America 8
Emory University United States of America 8
National Chi Nan University Taiwan 8
National University Of Singapore Singapore 7
University of New South Wales United Kingdom 7
Deakin University Australia 6
East China University of Science and Technol- China 6
ogy
Erasmus University Rotterdam Netherlands 6

Table 4  Top 10 contributing Authors Total pub- Total citations H Index G Index

authors lications

Ko, K. C. 8 32 4 5
Zaremba, A 8 66 5 8
Jegadeesh, N 7 5507 7 7
Muga, L 7 60 5 7
Nartea, G. V. 7 60 5 7
Titman, S 6 5201 6 6
Miffre, J 6 320 5 6
Du, D 6 76 4 6
Cheema, M. A. 6 41 4 6
Grobys, K 6 36 3 6

3.5 Citation analysis

Citation analysis is a widely used method to measure the impact of a publication

(Xu et al. 2018). There are two methods to conduct citation analysis (a) global
citation analysis and (b) local citation analysis. Global citation analysis focuses
on overall citations of a research publication. Local citation analysis stresses on
citations of a research publication within a particular set of research publica-
tions like in our paper, we find local citations of a research article by counting
the number of times that research article is cited by other research publications
within 532-node network (532 research papers used for final analysis). Citation
analysis discloses that 484 research studies have global citations, and 303 have
local citations. Table 5 shows the ten most influential research studies based on
local citations.

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Momentum investing: a systematic literature review and…

Table 5  Top 10 papers by local citations

Author (year) Local citations Total citations Average citations

Jegadeesh and Titman (1993) 457 3652 130.43

Jegadeesh and Titman (2001) 277 931 46.55
Rouwenhorst (1998) 272 732 31.83
Barberis et al. (1998) 244 1690 73.48
Hong and Stein (1999) 237 1367 62.13
Moskowitz and Grinblatt (1999) 190 574 26.09
Griffin et al. (2003) 172 376 20.89
Hong et al. (2000) 168 924 44
Daniel et al. (1998) 164 1966 85.48
Chan et al. (1996) 155 734 29.36

3.6 PageRank analysis

Citation analysis considers only one aspect for determining the impact of the
research paper that is popularity (Ma et  al. 2008; Xu et  al. 2018). It completely
ignores the other important aspect that is prestige. To overcome this problem, Pag-
eRank analysis can be used to determine the impact of a research paper. Page and
Brin developed this technique in 1998 to rank websites. Today it is also famous
among academicians to assess the impact of a research study. We have used the
following formula suggested by Xu et  al. (2018) to calculate the PageRank of a
research paper.
( ( ) ( ))
(1 − d) PR T1 PR Tn
PR(X) = +d ( ) +⋯+ ( )
N C T1 C Tn

where PR(X) is page rank of paper X, d is damping factor ranges from 0 to 1, T1,
…, Tn is a set of research papers that have cited paper X, C(T1), …, C(Tn) represents
citations of papers T1, …, Tn.
Table 6 shows the top 10 research papers based on PageRank measure. One can
draw a meaningful conclusion from this table that the popularity of a research paper
does not ensure its prestige. For instance, Moskowitz and Grinblatt (1999) and Grif-
fin et al. (2003) both are highly cited research papers. However, these studies are not
among the top 10 influential research papers based on PageRank measure.

3.7 Co‑citation analysis

Although there are many techniques in bibliometrics for data-clustering analysis;

co-citation analysis suggested by Small (1973) is most popular among the acad-
emicians (Fahimnia et  al. 2015; Xu et  al. 2018). We have done initial co-citation
mapping with the help of Gephi and find that 297 research papers out of total 532
research papers have been co-cited by other research publications within our total

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 S. Singh, N. Walia

Table 6  Top 10 papers by PageRank

Author (year) PageRank Local citation Global citation

Jegadeesh and Titman (1993) 0.012030 457 3652

Jegadeesh and Titman (2001) 0.008621 277 931
Rouwenhorst (1998) 0.007428 272 732
Barberis et al. (1998) 0.007153 244 1690
Hong and Stein (1999) 0.005967 237 1367
Carhart (1997) 0.005941 132 5181
Hong et al. (2000) 0.005870 168 924
Daniel et al. (1998) 0.005728 164 1966
Chan et al. (1996) 0.005069 155 734
Asness et al. (2013) 0.004957 132 583

sample. Further, we will use these research publications for data clustering (modu-
larity) analysis.

3.7.1 Modularity analysis

Data clustering has remained a popular literature classification tool among the acad-
emicians (Radicchi et al. 2004; Xu et al. 2018). Data clustering helps in identifying
research themes, establishing links between various research studies and grouping
them. Gephi uses Louvain algorithm for data clustering. Based on iterative optimi-
sation, Louvain algorithm maximises the modularity index by finding the optimum
number of clusters and exercising Louvain algorithm to our 297 node co-citation
network resulted in the formulation of four clusters. Each of these four clusters rep-
resents a unique set of research studies, and the number of research studies in each
cluster differs (90 in the first cluster, 48, 97 and 62 in cluster second, third and fourth
respectively). For content analysis, we have selected high-quality research papers
(research papers published in ABDC’s A* and A grade journals). As shown in
Table 7, we have selected 172 research papers out of 297 research papers for content
analysis. Out of these 172 research papers, 46 have been selected from cluster 1, 38
from cluster 2, 60 from cluster 3 and 28 from the last cluster.
To ascertain the research theme of each cluster, we identify the top 10 research
papers (leading papers based on PageRank score) from each cluster. This is the pop-
ular strategy among academicians to investigate the direction of research (Fahimnia
et al. 2015; Xu et al. 2018). Top research papers present a broad depiction of every
cluster.

3.7.2 Analysis of the research clusters

After identifying the top 10 research papers from each cluster (shown in
Table  8), we analyse the content of these research papers to determine the
research theme of every cluster. The first cluster concentrates on testing the
profitability of momentum investment strategies. This cluster also stresses on

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 Table 7  Classification of literature
Cluster No. of papers No. of selected papers Area of research focus

1 90 46 Testing the profitability of momentum investment strategies and explanations of the

momentum effect
Momentum investing: a systematic literature review and…

2 48 38 Sources of momentum profits in international financial markets

3 97 60 Improvement over traditional momentum strategies or alternative momentum strategies
4 62 28 Momentum effect in Asia-Pacific financial markets
Total 297 172

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 S. Singh, N. Walia

Table 8  Top 10 leading papers in each cluster

Cluster 1 Cluster 2

Jegadeesh and Titman (1993) Cooper et al. (2004)

Jegadeesh and Titman (2001) Chordia and Shivakumar (2002)
Daniel et al. (1998) Lee and Swaminathan (2000)
Hong and Stein (1999) Sagi and Seasholes (2007)
Barberis et al. (1998) Liu and Zhang (2008)
Rouwenhorst (1998) Chordia and Shivakumar (2006)
Moskowitz and Grinblatt (1999) Sadka (2006)
Griffin et al. (2003) Avramov et al. (2007)
Hong et al. (2000) Arena et al. (2008)
Chan et al. (1996) Bandarchuk and Hilscher (2013)
Cluster 3 Cluster 4

Asness et al. (2013) Rouwenhorst (1999)

George and Hwang (2004) Hameed and Kusnadi (2002)
Moskowitz et al. (2012) Fama and French (2012)
Novy-Marx (2012) Chui et al. (2010)
Barroso and Santa-Clara (2015) Demir et al. (2004)
Blitz et al. (2011) Hurn and Pavlov (2003)
Daniel and Moskowitz (2016) Chan and Lakonishok (2004)
Liu et al. (2011) Cakici et al. (2013)
Wang and Xu (2015) Gaunt and Gray (2003)
He and Li (2015) Durand et al. (2006)

various behavioural and risk-based explanations of momentum investing. Sec-

ond cluster focuses on finding the relevant sources of momentum profits. Third
cluster is about alternative momentum strategies. This cluster emphasises on
testing of alternative momentum strategies. Fourth cluster mainly focuses on
testing the profitability momentum strategies in Asia-Pacific financial markets.

4 Content analysis

We conduct content analysis to recognise sub-themes within each cluster. Co-

citation analysis does not include some notable research papers because of fewer
citations. Therefore, we also consider recently published papers (2017, 2018 and
2019) and identify another 23 research papers that fit into existing clustering
structure. Finally, we have reviewed 195 research papers (all research papers
published in A* and A rating journals).

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Momentum investing: a systematic literature review and…

4.1 Cluster 1: Testing the profitability of momentum strategies and explanations

of the momentum effect

Cluster 1 focuses on testing the profitability of momentum strategies and expla-

nations of the momentum effect. This cluster begins with the classical work of
Jegadeesh and Titman (1993). They find that stocks with superior returns in the past
also generate superior returns in the near future (3–12 months holding period) and
similarly stocks with poor returns in the past generate poor returns in the near future.
They report significant momentum effect in the US equity market. Academicians
also confirm the significant momentum effect in other financial markets (Chan et al.
1996; Rouwenhorst 1998; Schiereck et al. 1999; Jegadeesh and Titman 2001; Grif-
fin et al. 2003; Hon and Tonks 2003; Balvers and Wu 2006; Muga and Santamaría
2007). By testing various combinations of formation and holding periods, financial
researchers agree that 6/6 momentum investment strategy (6 months’ formation and
6 months holding) is the best strategy. Academicians do not limit themselves to only
one asset class. They report significant momentum effect across various traditional
and alternative asset classes such as mutual funds, corporate bonds, currencies,
commodities, exchange-traded funds and real estate investment trusts (Grinblatt
et al. 1995; Chui et al. 2003; Okunev and White 2003; Sapp and Tiwari 2004; Miffre
and Rallis 2007; Derwall et al. 2009; Beracha and Skiba 2011; Menkhoff et al. 2012;
Jostova et al. 2013; Fuertes et al. 2015; Narayan et al. 2015). Therefore, the momen-
tum effect is pervasive.
Although there is consensus among the researchers about the existence of
momentum effect, there are differences among academic researchers regarding the
explanations of momentum investing. Broadly, explanations of momentum invest-
ing can be categorised into two major groups. The first group belongs to rational
thinkers who believe that momentum premium is the compensation for the high risk
taken by momentum traders. Academic studies suggest plausible risk-based momen-
tum models (Conrad and Kaul 1998; Berk et  al. 1999; Moskowitz and Grinblatt
1999; Johnson 2002; Bansal et al. 2005; Li 2017; Ruenzi and Weigert 2018). Berk
et al. (1999) propose a theoretical model based on the notion that transitory persis-
tence in structure and systematic risk of a firm’s assets results in return continuation
(momentum effect). Johnson (2002) presents a rational model that provides a theo-
retical link between expected growth rates and return-continuation patterns. John-
son (2002) observes that past winners (losers) experience positive (negative) shocks
to their expected growth rate, which results in an immediate increase (decrease) in
their stock prices. Bansal et al. (2005) examine the role of consumption risk in cap-
turing momentum payoffs and document that consumption risk incorporated in cash
flows can capture momentum profits. More recently, Li (2017) suggests a rational
explanation based on a firm’s investment and documents that short-term productiv-
ity associated with winner stocks (companies) cause price continuation effect. Grif-
fin et  al. (2003) challenge these rational explanations by giving contradictory evi-
dence. Proponents of behavioural finance believe that the explanatory power of the
rational models is the result of data mining and over-fitting bias. They believe that
behavioural biases can solve the momentum puzzle. These explanations are known
as behavioural explanations. There are three subthemes prevalent in behavioural

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 S. Singh, N. Walia

explanations. These are initial underreaction, overreaction and disposition effect.

Underreaction theories are based on the notion that investors initial underreaction
deviate the stock prices from their fundamental value resulting in higher subse-
quent returns (Barberis et al. 1998; Hong and Stein 1999; Hong et al. 2000; Vaya-
nos and Woolley 2013; Da et al. 2014; Chen and Lu 2017). Barberis et al. (1998)
report that investors’ conservatism1 cause underreaction to new information. Due
to this underreaction stocks trade below their intrinsic value which results in higher
subsequent returns (momentum effect). Hong and Stein (1999) propose a theoreti-
cal model based on two groups of investors. These two groups are ‘news-watch-
ers’ and ‘momentum traders’. Hong and Stein (1999) find that ‘gradual diffusion of
information’ among the news watchers cause underreaction. Later on, Hong et  al.
(2000), Doukas and McKnight (2005), Da et  al. (2014) and Chen and Lu (2017)
augment the findings of Hong and Stein (1999). Vayanos and Woolley (2013) sug-
gest an institutional momentum theory based on the outflow of investment funds.
They reveal that gradual outflow of funds (underreaction) in response to a market
shock cause momentum. Recently, Docherty and Hurst (2018) prove that investors’
myopia2 cause gradual diffusion of fundamental news which further result in price
continuation effect.
Contrary to underreaction theories, overreaction models insist that investors over-
reaction drives stock prices far away from their intrinsic values that cause short term
momentum (Daniel et al. 1998; Hillert et al. 2014; Adebambo and Yan 2016). Dan-
iel et al. (1998) find that investors’ overconfidence and self-attribution3 cause market
overreaction. Adebambo and Yan (2016) confirm the findings of Daniel et al. (1998)
by examining the trading patterns of mutual fund managers in the United States of
America. More recent and intriguing behavioural models focus on the role of dispo-
sition effect in explaining the momentum effect (Grinblatt and Han 2005; Hur et al.
2010; Hur and Singh 2019). Grinblatt and Han (2005) present a behavioural model
based on two types of investors, i.e. disposition and rational investors. Irrational
behaviour of disposition investors creates a spread between the intrinsic value and
current market price of a stock. Based on the direction of this spread (either positive
or negative), rational investors will either take a long or short position which will
further result in upward or downward momentum. Extending the work of Grinblatt
and Han (2005), Hur and Singh (2019) observe that anchoring bias, along with dis-
position effect plays a substantial role in solving the momentum puzzle.

1
  Conservatism refers to the tendency of investors to stick with their original beliefs (past information)
which results in a slow reaction to new information.
2
  Investors’ myopia signifies investors’ propensity to overweight the temporary price changes than long-
run intrinsic value (Docherty and Hurst 2018).
3
  Daniel et al. (1998) find that overconfident traders pay more attention to own private information than
public information. Self-attribution cause continuing overreaction if public information validates the pri-
vate information.
  4 Disposition effect refers to the investors’ tendency to hold losing stocks longer than winning stocks
(Shefrin and Statman 1985).

13
Momentum investing: a systematic literature review and…

4.2 Cluster 2: Sources of momentum profits

Cluster 2 focuses on finding the relevant sources of momentum profits. Cluster 1

serves as a foundation for this cluster. Rational and behavioural models discussed
in cluster 1 provide the rationale behind the link between momentum and various
sources. This cluster extends cluster 1 by providing a list of the various firm and
market-specific characters that can be used as filters to enhance the performance of
momentum strategies given by Jegadeesh and Titman (1993). This cluster begins in
2000 when Lee and Swaminathan (2000) establish a link between trading volume
and momentum payoffs. Lee and Swaminathan (2000) report that stocks with higher
(lower) past trading volume tend to generate lower (higher) future returns. They also
find that high volume winners and low volume losers exhibit faster reversals. These
findings attempt to harmonise the short-horizon “underreaction” and continuing
“overreaction” models. After that, Chordia and Shivakumar (2002) propose a mac-
roeconomic model to capture momentum payoffs. They find that momentum strate-
gies generate positive payoffs only during expansionary time-periods, whereas dur-
ing the economic downturn, momentum payoffs are negative. The findings of this
study support risk-based momentum explanations. Later on, many other academic
studies also explore various sources. Firm or stock-specific characteristics and mar-
ket-specific characteristics are two major categories of these sources.
Research studies report significant relationship among specific firm-specific
characteristics such as dividend, credit ratings, turnover, firm expansion, firm size,
idiosyncratic volatility, capital investment and momentum payoffs (Lee and Swa-
minathan 2000; Avramov et al. 2007; Sagi and Seasholes 2007; Arena et al. 2008;
Asem 2009; Jiang et  al. 2012; Nyberg and Pöyry 2014; Booth et  al. 2016). Avra-
mov et al. (2007) support rational explanations by establishing a link between credit
risk and momentum profits. They find significant momentum profits only among
non-investment grade firms. Arena et al. (2008) reveal that stocks with greater idi-
osyncratic volatility4 tend to generate higher momentum payoffs, and these stocks
experience quicker reversals. These results are in accordance with the view that ini-
tial underreaction to firm-specific news is the main driver behind the momentum
profits. Asem (2009) provides another evidence in support of underreaction theories
by suggesting that investors can enhance their momentum payoffs by taking a long
position in stocks that have increased dividend and short position in stocks that have
decreased dividends. Jiang et al. (2012) establish a link between capital investments
and momentum profits. They document that stocks with substantial capital invest-
ments generate enormous momentum profits. Corroborating the rational explana-
tions, Booth et al. (2016) demonstrate that firm size (a proxy for risk) captures the
momentum effect. They find significant price continuation effect only in the case of
small-cap equities. Bandarchuk and Hilscher (2013) conduct a comprehensive study

4
  Total volatility of a stock’s return can be divided into two portions (a) explainable portion (b) residual
portion. The residual portion (the portion of total volatility of a stock’s return that cannot be captured by
market model) is called idiosyncratic volatility.

13
 S. Singh, N. Walia

on firm-specific characteristics and momentum profits. They report that these char-
acteristics only work for stocks with more extreme returns.
Academic studies also find strong relationship among certain market-specific fac-
tors such as market states, market-wide liquidity, market dynamics, market senti-
ments, macroeconomic variables, political risk and momentum profits (Chordia
and Shivakumar 2002; Cooper et al. 2004; Sadka 2006; Liu and Zhang 2008; Asem
and Tian 2010; Stambaugh et  al. 2012; Antoniou et  al. 2013; Garcia-Feijoo et  al.
2018; Filippou et al. 2018). Following the overreaction model (Daniel et al. 1998),
Cooper et  al. (2004) report that profitability of momentum strategies is dependent
upon market states and these strategies generate positive returns only in UP mar-
ket states.5 Sadka (2006) provides direct evidence in favour of rational explanations
by establishing a link between market-wide liquidity and momentum payoffs. Liu
and Zhang (2008) provide another evidence in support of risk-based explanations.
They examine the role of the growth rate of industrial production (a standard macro-
economic factor) in capturing momentum profits. Asem and Tian (2010) reveal that
momentum investment strategies generate superior returns when markets remain in
the same state than when markets transit to other state. They find that during the
times of market continuation investor’s confidence is higher that results in superior
momentum payoffs. Antoniou et al. (2013) find that significant momentum payoffs
arise only when investor sentiments are positive, i.e. when investors feel optimis-
tic. Han and Li (2017) corroborate the findings of Antoniou et al. (2013). Recently,
Filippou et al. (2018) provide evidence in support of rational explanations by linking
the performance of momentum portfolios with political risk.

4.3 Cluster 3: Improvement over traditional momentum strategies or alternative

momentum strategies

Although the first research paper in this cluster published in 2004; after the sub-
prime crisis, this cluster has witnessed rapid growth. During the subprime crisis
and recovery period, traditional momentum strategies performed worst (Moreira
and Muir 2017; Dobrynskaya 2019). At that time, financial researchers shifted
their focus to develop alternative versions of momentum that perform better than
traditional momentum strategies, especially during nasty times. Firstly, George
and Hwang (2004) suggest 52-week high momentum. By selecting stocks “based
on the ratio of their current prices to past 52-week high prices”, many academic
studies confirm the superiority of 52-week high momentum strategies over tradi-
tional momentum strategies (George and Hwang 2004; Marshall and Cahan 2005;
Du 2008; Liu et al. 2011). Academic studies also find that both traditional momen-
tum and 52-week high momentum strategies perform miserably during high volatile
periods (Wang and Xu 2015; Min and Kim 2016; Daniel and Moskowitz 2016). To
resolve this issue, Blitz et al. (2011) recommend residual momentum. They report

5
  Cooper et  al. (2004) define up and down market states with the help of lagged 36  months’ market
return. For a particular month, if lagged 36 months’ market return is positive, then the market is said to
be in UP market state; otherwise, the market is said to be in downstate.

13
Momentum investing: a systematic literature review and…

that residual momentum performs better than traditional momentum during the cri-
sis period. The fundamental difference between traditional momentum and residual
momentum lies in the stock selection process for portfolio formation. In residual
momentum, stocks are selected on the basis of their residual return (stock return
after adjusting Fama–French factors) rather than on the basis of their total return.
Several studies report the superiority of residual momentum strategies over the
traditional momentum (Chang et  al. 2018; Lin 2019). In recent years, time-series
momentum has gained much attention among financial researchers. Moskowitz et al.
(2012) introduce time-series momentum. Time-series momentum also called abso-
lute momentum, is based on selecting financial assets on the basis of their own past
performance, neglecting the performance of other financial assets. After the work of
Moskowitz et al. (2012) numerous research studies have explored the profitability of
time-series momentum strategies (He and Li 2015; Bird et al. 2017; Shi and Zhou
2017; Goyal and Jegadeesh 2018; Lim et al. 2018; He et al. 2018). Some research
studies suggest volatility scaling approaches to avoid huge losses resulting from
traditional momentum strategies during bad times (Wang and Xu 2015; Barroso
and Santa-Clara 2015; Kim et al. 2016; Daniel and Moskowitz 2016). Barroso and
Santa-Clara (2015) propose risk-managed momentum strategies based on constant
volatility scaling whereas Daniel and Moskowitz (2016) suggest alternative momen-
tum framework based on dynamic volatility scaling approach. Fan et al. (2018) com-
pare these two volatility scaling approaches and find that alternative momentum
strategy based on dynamic volatility scaling generates superior returns. Several stud-
ies develop combined investment strategies such as combining value and momen-
tum, cross-sectional and time-series momentum and these combined strategies per-
form better than standalone momentum strategies (Serban 2010; Asness et al. 2013;
Lim et al. 2018).

4.4 Cluster 4: Momentum effect in Asia‑Pacific financial markets

Cluster 4 focuses on testing the momentum effect in Asia-Pacific financial mar-

kets. In the last 10–15  years, asset managers have shifted their focus from mature
European and North American financial markets to Asia-Pacific financial markets
because these offer more growth opportunities than mature European and North
American markets. In the recent past, numerous researchers have studied the perfor-
mance of different investment strategies in Asia-Pacific financial markets. Evidence
of the momentum effect in Asian markets is mixed. Rouwenhorst (1999) initially
test the performance of momentum strategies across 20 emerging markets (includ-
ing 9 Asian markets) and find that these strategies generate significant profits only
in 3 Asian markets. Hameed and Kusnadi (2002) examine the momentum effect in
six Asian stock markets. They do not exhibit any return continuation pattern in these
markets. Griffin et al. (2003) also report weak momentum effect in Asia. After that,
many studies test the momentum effect in different Asian regions. Research studies
report no or minor momentum effect in Japan and Taiwan (Chui et al. 2000; Fama
and French 2012; Asness et al. 2013). Evidence of momentum effect in the Chinese
stock market is more confusing. Some studies disclose significant momentum effect

13
 S. Singh, N. Walia

in Chinese stock market (Kang et al. 2002; Naughton et al. 2008; Cheema and Nar-
tea 2014) while other studies do not exhibit any momentum effect in Chinese stock
market (Zhou et al. 2010; Pan et al. 2013). Researchers find significant momentum
effect in the Indian stock market (Gupta et al. 2010; Sehgal and Jain 2011; Mahesh-
wari and Dhankar 2017). Although there are mixed results regarding the existence of
momentum effect in Asia region, research studies exhibit strong momentum effect in
Pacific region stock markets (Hurn and Pavlov 2003; Gaunt and Gray 2003; Demir
et al. 2004; Vanstone and Hahn 2017).

5 Discussion

The first cluster began in 1993, the second cluster firstly appeared in 2000, and the
fourth cluster emerged in 1999. All these three clusters have witnessed a downfall in
research publications after the subprime crisis. Cluster 3 has witnessed a significant
boost in research publications after the subprime crisis. We notice that momentum
investing research has constantly evolved into two mainstreams. First, second and
fourth clusters combined represents one stream. These three clusters mainly concen-
trate on testing profitability of traditional momentum strategies (momentum strate-
gies suggested by Jegadeesh and Titman) across different financial markets, expla-
nations and sources of these strategies. Cluster 3 represents another stream. This
stream focuses on suggesting better alternatives of traditional momentum strategies
that not only generate a better return than traditional momentum strategies but also
minimise the risk, especially downside risk during the extreme times. This cluster
also includes the research studies that compare whether combined momentum strat-
egies (combining one version of momentum with other) perform better than stan-
dalone momentum strategies. After analysing the findings of various studies, we
have drawn the following interesting facts.

1. Although academic research on momentum investing begins with the classical

work of Jegadeesh and Titman in 1993, it has witnessed rapid growth after 2001.
2. 8 major journals contribute almost 80% of 195 research papers selected for con-
tent analysis. Among these 8 major journals, Journal of Finance and Journal of
Banking and finance published most research studies on momentum investing.
3. Research on momentum investing can be categorised into two major streams
consisting of four clusters. The second stream can be seen as an extension of the
first stream. Cluster 3 presents the nascent research area in the field of momentum
investing.

After undertaking content analysis, we find certain research themes in the

field of momentum investing on which future researchers can focus. Firstly, most
existing academic studies on momentum investing has focused on one or two
versions of momentum. In the first and second cluster, most studies have used
cross-sectional momentum suggested by Jegadeesh and Titman. In the third clus-
ter, most studies consider their own versions of momentum. Although there are

13
Momentum investing: a systematic literature review and…

academic studies which compare two or three versions of momentum (Gupta

et al. 2010; Lim et al. 2018); there is not a single study that compares all the ver-
sions of momentum (cross-sectional momentum, industrial momentum, 52-week
high momentum, residual momentum, time-series momentum). Therefore, in the
future, researchers can focus on comparing all the versions of momentum and
suggest which version of momentum performs best.
Secondly, most research studies in cluster 3 are about testing the profitability
of alternative versions of momentum and comparing the performance of these
alternative versions with the performance of traditional momentum. There are
very few studies regarding the potential explanations and sources of profitability
of these strategies (Kim et al. 2016; Andrei and Cujean 2017; Chang et al. 2018).
Future researchers can target the relevant sources of profitability of different
alternative momentum strategies. Apart from this, most research studies on alter-
native momentum strategies test the profitability of these strategies in developed
stock markets. Nevertheless, in recent years, global fund managers have shifted
their focus on emerging stock markets. Testing the profitability of these alterna-
tive momentum strategies in the emerging markets may become a potential area
for future research.
Most academic studies on momentum have reported raw or risk-adjusted momen-
tum profits. These studies skip one of the critical factor, which is the transaction
cost. Very few academic studies have tested the profitability of momentum strate-
gies after adjusting the transaction costs (Korajczyk and Sadka 2004; Siganos 2010).
The role of transaction cost increases in emerging markets because brokerage com-
missions are comparatively high in emerging markets. Apart from transaction cost,
academic studies do not take into consideration the short sales constraints. In many
stock markets, short selling is not allowed. Therefore, testing the profitability of dif-
ferent momentum strategies after adjusting the transaction costs and after consider-
ing the short sale constraints can become a fertile area for future research.
Academic studies on the explanations of momentum have focused either on the
rational aspect or the behavioural aspect. Both camps claim that their explanations
are better than the other one. However, in the recent past, the concept of progressive
rationality has gained a lot of attention. This concept tries to reconcile the behav-
ioural and rational thoughts. Zoghlami (2013) explains the momentum payoffs with
the help of progressive rationality, but it is limited to only the Tunisian stock market.
More work in future is needed in this area.
Combining several momentum investment strategies represent a significant area
where future researchers can focus. Asness et al. (2013) combine momentum strat-
egies with value investment strategies and report that the combined strategy per-
forms better than standalone strategies. In future, momentum strategies can be com-
bined with other investment strategies like momentum effect with low-price effect,
momentum effect with moving averages etc. Researchers can also test whether
these combined momentum strategies can beat standalone momentum strategies.
Apart from combining momentum strategies with other investment strategies, future
researchers can test the applicability of momentum strategies on cryptocurrencies.
Based on blockchain technology, these virtual currencies are emerging as new finan-
cial instruments. Grobys and Sapkota (2019) explore the momentum effect in the

13


13
Table 9  Identifying future research themes for momentum investing
Category Issue Future research theme

Comparison of different versions of momentum Existing studies compare two or three versions of momen- Studies that compare all the versions of momentum
tum.
Sources of alternative versions of momentum Lack of studies focusing on sources of the different alter- Studying potential sources of alternative versions of
native versions of momentum momentum
Testing the alternative momentum strategies Few research studies focus on testing the alternative Testing alternative momentum strategies in emerging
momentum strategies in emerging markets markets
Transaction cost Most Academic studies report momentum payoffs without Testing the profitability of momentum strategies after con-
considering transaction cost sidering transaction cost
Short sales constraints Few studies focus on short sale constraints Applicability of momentum strategies in financial markets
where short sale is restricted
Reconciling rational and behavioural thoughts Existing studies either focus on rational explanations or on Research studies focusing on reconciling the rational and
behavioural explanations behavioural explanations
Virtual Currencies Lack of research studies testing the momentum effect in Testing the momentum effect in virtual currencies
virtual currencies
S. Singh, N. Walia
Momentum investing: a systematic literature review and…

crypto market. Nevertheless, more research is needed in this field. In short future
researchers can focus on research subthemes mentioned in Table 9.

6 Conclusion

Momentum investing has taken an inevitable place in the investment strategies lit-
erature. Apart from its wider acceptability in academic research, investment prac-
titioners use these strategies to generate significant alphas in the financial markets.
Although the literature on momentum anomaly comprises of a few review studies
focusing on specific themes, a through structured review combined with bibliomet-
ric and network analysis covering all the major aspects of momentum investing has
not been done. In this initial effort, we outline the evolution of momentum invest-
ing field, identify influential research studies and broader classification of literature.
Besides classification, we also conduct content analysis of high ranked academic
papers to gain valuable insights. We draw the broader conclusion that testing the
performance of momentum investment strategies and finding their potential expla-
nations and sources has remained major themes among the researchers. Recent
academic studies are focusing on developing alternative momentum strategies to
improve the performance of traditional strategies.
Our study will help the researchers working on momentum investing in multiple
ways. First, our study outlines the knowledge framework of momentum investing.
This knowledge framework will help the researchers in understanding how momen-
tum investing evolved. Second, it may help them in identifying mature and emerg-
ing themes on momentum investing. Researchers can avoid these established themes
and can focus on emerging themes. Third, our study represents a new methodology
for systematic reviews by combining various bibliometric tools and content analysis.
The study is not free from limitations. First, the present research relies only on
the Scopus database for literature search. Future studies can broaden the search
scope by using multiple bibliometric databases. Second, we exclude research studies
related to the applications of Robotics, Artificial Intelligence and Supported Tech-
nologies (RAIST) in momentum investing. As an emerging theme, these studies
may enlighten this structured review. Third, the present review emphasises only on
journal articles and thus discards other forms of literature such as books and “gray
literature”, i.e. conference papers, working papers, government reports, research
reports. These other forms of literature might contain intriguing findings that may
offer additional insights.

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