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Article

Momentum in Japan: The Exception that Proves
the Rule

Clifford Asness
The Journal of Portfolio Management Summer 2011, 37 (4) 67-75; DOI: https://doi.org/10.3905/jpm.2011.37.4.067
Clifford Asness
is the managing and founding principal of AQR Capital Management, LLC, in Greenwich, CT.
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Abstract

Momentum strategies deliver positive profits in a variety of markets and asset classes with one glaring exception—Japan. The failure of momentum in Japan has led some to call into question momentum’s viability, suggesting that perhaps momentum’s success elsewhere may be the result of data mining. Asness rejects that interpretation. He argues that because value and momentum strategies are strongly negatively correlated, they need to be studied as a system. He shows that the results in Japan are perfectly consistent with value and momentum working everywhere at similar levels and are entirely within the range of statistical noise. Viewed as a system, he shows that momentum strategies are actually a success in Japan. In sum, Asness finds that the Japanese momentum results are supportive, not contrary, to the idea that momentum is a strong ex ante efficacious strategy around the world. Put differently, the Japanese momentum results are the exception that proves the rule.

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The Journal of Portfolio Management: 37 (4)
The Journal of Portfolio Management
Vol. 37, Issue 4
Summer 2011
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Momentum in Japan: The Exception that Proves
the Rule
Clifford Asness
The Journal of Portfolio Management Jul 2011, 37 (4) 67-75; DOI: 10.3905/jpm.2011.37.4.067

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Momentum in Japan: The Exception that Proves
the Rule
Clifford Asness
The Journal of Portfolio Management Jul 2011, 37 (4) 67-75; DOI: 10.3905/jpm.2011.37.4.067
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    • Abstract
    • DATA DESCRIPTION
    • THE BASIC EVIDENCE
    • SIMULATIONS
    • EX POST OPTIMAL PORTFOLIOS
    • FURTHER ANALYSIS OF CORRELATIONS
    • THREE-FACTOR REGRESSION INTERCEPTS
    • CONCLUSION
    • ENDNOTES
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