Three Insights from Academic Research Related to Momentum Strategy

• momentum is not an anomaly in a risk-based asset pricing framework as riskier assets tend to be in the loser portfolios after (large) increases in the price of risk. The risk of momentum portfolios usually decreases with the prevailing price of risk, and their risk premiums are approximately negative quadratic functions of the price of risk (and the market premium) theoretically truncated at zero.
  
  — changes to market liquidity adds to the explanation of momentum crashes along with the market rebounds, this relationship is driven by the asymmetric large return sensitivity of short-leg of momentum portfolio to changes in market liquidity that flares the tail risk of momentum strategy in panic states
  
  — momentum returns are highly related to market risk arising from return dispersion (RD) as momentum risk loadings and RD risk loadings are similarly priced in momentum portfolios

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