Mirror-image factors are wiping out quant alpha
Equity momentum and value strategies are cancelling each other out, buy-siders say
Extreme correlations between different groups of stocks are fouling up the returns of widely used quant strategies.
A clustering of stocks into market darlings and market duds reached its most extreme level in September since the financial crisis. That has turned common momentum strategies – which go long high-momentum stocks and short those with low momentum – into a wholehearted bet against another popular strategy: value.
These strategies are traditionally seen as negatively correlated and
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