Momentum Factor And Style Rotation Effect

The three-gate gauntlet · genuine only if it clears all three and survives adversarial refutation

Gate 1

Survivorship-free

free

clean panel

Eliminated here

Gate 2

Placebo ≥ P95

P23

outranked ~46 of 200 baskets

Gate 3

Cost-aware net

RF -0.91

net-negative after costs

Failed

Worst 12-month leg (RF)-0.83

−1.00 floor0

Every strategy here — winners included — loses in its worst 12 months. Depth is honest context, not the verdict.

Rejected at the luck gate — its net ranked no better than random baskets (below the P95 skill line).

This effect ranks stocks by past momentum within a style-rotation framework, in the lineage of the Barberis-Shleifer style-investing work, and goes long recent winners against recent losers.

What we found

On our survivorship-free panel the style-rotation momentum ranking showed no rank-skill beyond noise. Its risk-adjusted RF was negative (-0.91) and it landed at the 23rd placebo percentile, below the median of random baskets built the same way. In other words, the signal did not sort future returns any better than chance, so we do not treat it as a diversifying factor-leg.

How we tested it

2005–2026 test windowmodelled liquidity-aware costssurvivorship free

Tested on a survivorship-free 1077-name US common-stock panel, 2005-2026. Realistic modelled costs.
Placebo / robustness test: real result vs random baskets or shuffled signals (real vs the 95th percentile of random)

Source: Momentum + style rotation (Barberis-Shleifer style-investing lineage)
Read the paper ↗

← The Academic Audit — all 54 studies

Research, not investment advice. “Validated” factor-legs are market-neutral diversifying building blocks with a losing worst year — none is a standalone tradeable strategy. Metrics are cost-aware and modelled (not live fills); the 2005–2026 test window is out-of-sample versus the source paper. Dollar figures are not returns and are omitted by design.