Book Mention: Quantitative Momentum by Gray and Vogel

This does not rise to the level of a "review" so we'll call it a mention.

Quantitative Momentum (Wiley Finance, 2016. 208 pages)  is a great new work on momentum investing by Wesley Gray and Jack Vogel. It follows a previous work (not read by me yet) Quantitative Value.  QM is a well researched and appropriately analytical contribution to the literature on the momentum anomaly.  It is good, as would be expected, at giving a background and rationale for the momentum effect.  The book also makes a good case for the place for momentum in a portfolio while also being particularly helpful with some of the concepts of implementation.  It is not over-the-top technical in terms of academic finance and mathematics (no calculus or limits or summation notation as far as I saw in a brief read) and I think it is approachable to a retail investor who has at least a little background in or exposure to the various concepts involved in understanding alternative risk.  

Several of the key points to draw out that are emphasized by Gray and Vogel, or at least the ones that stuck in my mind after reading (if mis-read I will take correction):

• "Momentum is not growth investing"  and they show why
• Value and momentum arise from more or less related phenomena and are complimentary to each other.  The complementarity is particularly well suited to enhancing portfolio efficiency
• There are both risk-based and behavior based narratives, along with limits to arbitrage, that propel both value and momentum as anomalies 
• Value and Momentum are likely to have staying power as long as there continues to be excess risk in the strategies, investor psychology stays sufficiently wanky, and arbitrage by large players continues to be expensive and hard.  

Part Two of the work, which I more skimmed than read, is focused on the process of building a momentum portfolio.  This was skimmed because I plan to go back and dwell on it in more detail over time. I find this type of content to be quite useful.  Also useful, I thought, were the chapter end notes which are better described as chapter-end-bibliographies.  I like that because I can now mine other research and publications in a more systematic way than just accidentally running into anything on the internet that happens to grab my attention, which is what I seem to spend a lot of time doing these days. 

 The one asterisk to the general positive tone above is that I thought the book was a little thin when it comes to concepts related to the role or use of trend following.  The book left me feeling like trend-following is no more than some type of thin, last-minute overlay that might enhance the efficiency of "real" momentum.  On the other hand I know from my own reading that there is some reasonable body of thought that is willing to contend that trend-following and time series momentum (a real momentum, of course) are made of the same stuff.  For example in "WhichTrend Is Your Friend? By Ari Levine and Lasse Heje Pedersen at cfabubs.org they say the following: We show that the most general form of [moving average cross over or "trend following"] can be viewed as a special case of the most general [time series momentum] strategy, and vice versa."  I would have liked to have seen more on this since, from a retail-systematic-investor perspective, trend following is a very highly implementable strategy. 

Gray and Vogel mention in the book that if they had been required to survey the literature on momentum the end result would have been a book of more than 1000 pages.  No doubt they are right.  Here, though, are a few additional reads I'll throw out there just for fun for some additional perspective:

Review: Quantitative Momentum, Charles Sizemore

Dynamic Asset Allocation Part II: The Case For Momentum InPortfolio Management Blue Sky Asset Management, BSAM.com [good general overview]

Which Trend Is Your Friend? Ari Levine and Lasse Heje Pedersen 

Time Series Momentum Tobias Moskowitz, Yao Hua Ooi, Lasse H. Pedersen Journal of Financial Economics 

Value and Momentum Everywhere, Cliff Asness, Tobias Moskowitz, Lasse H. Pedersen, Journal of Finance.  

Fact, Fiction and Momentum Investing, Cliff Asness, Andrea Frazzini, Ronen Israel, Tobias Moskowitz. Journal of Portfolio Management 

Swedroe: New Book Shines Light On Momentum, a review.