Momentum is driven by over- or underreaction
Momentum from overreaction: risk of price reversals
Momentum from underreaction: less risky, more sustainable
Robeco quant models use momentum from underreaction
Cumulative long-short momentum performance
Average cumulative performance after formation of long-short portfolios that start each month in the period January 1986 to December 2012 and are held for 60 months. The universe consists of the largest 3,000 constituents of the S&P Broad Market Index each month. A residual (generic) momentum portfolio consists of equal long/short positions in the top/bottom decile residual (generic) momentum stocks of the universe.