Financial academics have described so many equity factors that the whole universe of them is sometimes called “factor zoo”. Therefore, it is no surprise that there is a quest within an academic community to bring some order into this chaos. An interesting research paper written by Favilukis and Zhang suggests explaining a lot of equity factors with momentum anomaly. They show that very often, up to 50% of the equity factor returns can be linked to returns of momentum strategy. This link is especially prevalent in short legs of equity factors.
Authors: Favilukis, Zhang
Title: One Anomaly to Explain Them All