Value and Momentum Everywhere

Value and Momentum Everywhere

Clifford S. Asness, Tobias J. Moskowitz, and Lasse H. Pedersen∗

First Version: March 2008 This Version: February, 2009

Abstract Value and momentum ubiquitously generate abnormal returns for individual stocks within several countries, across country equity indices, government bonds, currencies, and commodities. We study jointly the global returns to value and momentum and explore their common factor structure. We find that value (momentum) in one asset class is positively correlated with value (momentum) in other asset classes, and value and momentum are negatively correlated within and across asset classes. Liquidity risk is positively related to value and negatively to momentum, and its importance increases over time, particularly following the liquidity crisis of 1998. These patterns emerge from the power of examining value and momentum everywhere simultaneously and are not easily detectable when examining each asset class in isolation.

Asness is at AQR Capital Management. Moskowitz is at the Graduate School of Business, University of Chicago and NBER. Pedersen is at the Stern School of Business, New York University, CEPR, and NBER. We thank Aaron Brown, Gene Fama, Kenneth French, Robert Krail, Michael Mendelson, Stefan Nagel, Lars Nielsen, Otto Van Hemert, and Jeff Wurgler for helpful comments, as well as seminar participants at the University of Chicago, Princeton University, the Danish Society of Financial Analysts with Henrik Amilon and Asbjørn Trolle as discussants and the NBER Summer Institute Asset Pricing Meetings with Kent Daniel as a discussant. We also thank Radhika Gupta, Kelvin Hu, Adam Klein, Ari Levine, Len Lorilla, Wes McKinney, and Karthik Sridharan for research assistance.

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I. Introduction

Two of the most studied capital market phenomena are the relation between an asset’s return and the ratio of its “long-run” (or book) value relative to its current market value, termed the “value” effect,...