Sheridan Titman On His Seminal Paper on Momentum Investing and What He Has Learned Since

Momentum was a factor that many academics were very reluctant to embrace. Our guest this week, Sheridan Titman, helped to change that with his 1993 paper "Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency" that he co-wrote with Narasimhan Jegadeesh. In this interview, we discuss both his original work on momentum and what he has learned since. We also cover his research on combining value and momentum and the relationship between location and firm value, and what he thinks practitioners get wrong about academic research.
We hope you enjoy the discussion.
Learn More About Sheridan's research areas.
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ABOUT THE PODCAST
Excess Returns is an investing podcast hosted by Jack Forehand (@practicalquant) and Justin Carbonneau (@jjcarbonneau), partners at Validea. Justin and Jack discuss a wide range of investing topics including factor investing, value investing, momentum investing, multi-factor investing, trend following, market valuation and more with the goal of helping those who watch and listen become better long term investors.
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[@gregwhitacre6496]

One of the best interviews I’ve watched. Some very interesting phenomenons

[@ExcessReturns]

Thank you Greg. Sheridan is super impressive and knowledgeable. He hasn't done many podcasts, so we were happy he was able to join us.

[@financeisinteresting5618]

My PhD topic long time ago - thank you

[@adriantrummer6126]

GOAT

[@theleanmachine4174]

Nice interview

[@rudi5764]

Super interesting!

[@HubertHeller]

Which city do the 90% of the ideas come from?

[@nemuritai]

Why does mometum require a high annual turnover (%300-400+), unlike value (~20%)?

[@ExcessReturns]

Momentum, which uses price, sees a lot more changes day to day, week to week vs. many of the value factors. So a strategy using momentum is naturally going to have a lot more changes as prices consistently change and as stocks come in and out of the high momentum group. Also, with value you want to give cheap stocks the time needed to revert back higher and often times that happens over a longer period of time than say a month or two. As a result of both of these things you tend to have higher turnover in momentum approaches vs. many value investing methods.

[@nemuritai]

@@ExcessReturns Thank you! Keep up the good work! PS:I found Understanding Momentum
Scowcroft Sefton Table 1 has a matrix of returns by formation and holding periods, higher returns in the 6-12 formation and 3-12m holding periods. 1m reversal seen in same matrix. Makes sense that value is a lower frequency phenomenon even rebalanced annually turnover typically only ~20%