Momentum strategies are based on the observation that assets with the best recent performance tend to outperform the market. This isn’t supposed to be true, at least not if you believe in the efficient market hypothesis, but studies of US stocks, commodities, currencies, and a host of other asset classes shows that it is.
“Curiously, even though the market for nominal U.S. Treasury securities is among the deepest and most liquid in the world, no one has rummaged through government bond term structures to find similar strategies that work, no matter what the future general direction of interest rates,” writes J. Benson Durham, assistant VP of the Federal Reserve Bank of New York’s markets group.
Bond momentum strategy beats the market...
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