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Stats › Intraday and market microstructure › Momentum net of costs

Momentum costs 7.2 per cent a year to implement, and one proprietary study says an order of magnitude less

Momentum
7.18%
Value
3.81%
Size
0.26%
Market
-0.38%

Estimated all in implementation cost per year, from an extended cross sectional method comparing the factor compensation earned by stock portfolios with that earned by mutual funds. 4,267 US domestic equity mutual fund groups, January 1970 to December 2016, 724,995 fund month observations, value weighted, with Newey West t statistics of 5.53, 5.08, 0.42 and -1.28 respectively.

Comparing what stock portfolios earn against what mutual funds earn puts momentum's all in implementation cost at 7.18 per cent a year with a t statistic of 5.53. Value costs 3.81 per cent. Size and the market cost nothing measurable.

7.18% a year, t = 5.53All in implementation cost of momentum
3.81% a year, t = 5.08The same for value
0.26% a year, t = 0.42Size
-0.38% a year, t = -1.28Market

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