The performance of value and momentum investment portfolios: Recent experience in the major European markets

Abstract

Value and momentum investing are two approaches to investing which have been increasingly utilised either overtly or covertly by fund managers. Consistent with their increasing popularity, a number of academic studies have found such strategies capable of outperforming traditional benchmarks. The majority of these studies have been focused on the US market and covered the 1980s and 1990s, during which time there was a consistent upward trend in stock prices. In this paper the authors examine a wide selection of value and momentum strategies applied to the major European markets over the period from 1990 to 2002. This period captures a large upward movement followed by a significant correction. The authors find strong evidence that certain implementations of value and momentum investing performed particularly well over this period across the European markets, with the outperformance from value being confined to the correction period, while that from momentum occurred during the run up during the 1990s.