Most of the main risk factors — value and size, for example — are essentially bets on relatively unloved stocks. But momentum is the exact opposite: it’s a tilt towards the most popular stocks. In other words, compared to other factors, it’s counter-cyclical.
You could also argue that it’s a systematic form of market timing, which we all know can be dangerous.
So, does is tilting towards momentum really a good idea? That's one of the issues we explore in the latest in this series of videos for Sparrows Capital.
The size factor