Asness, Clifford S., Tobias J. Moskowitz, and Lasse Heje Pedersen (2013) examine the returns of value and momentum strategies across eight diverse markets and asset classes. They find consistent value and momentum premia in every asset class and strong common factor structure among their returns. Value and momentum are more positively correlated across asset classes than passive exposures to the asset classes themselves, but negatively correlated within and across asset classes. The authors propose a three-factor model that captures global returns across asset classes, the Fama-French U.S. stock portfolios, and hedge fund indices. They find that liquidity risk is negatively related to value and positively related to momentum globally. Funding liquidity risk is a partial source of these patterns, which are identifiable only when examining value and momentum simultaneously across markets. The authors challenge existing behavioral, institutional, and rational asset pricing theories that focus on U.S. equities. They find that value and momentum strategies are negatively correlated with each other within and across asset classes, suggesting the presence of common global factors. The authors also find that value and momentum strategies are negatively correlated with liquidity risk, implying that part of the negative correlation between value and momentum is driven by opposite signed exposure to liquidity risk. The evidence suggests that value and momentum premia are driven by common global factors, and that liquidity risk is a partial explanation for these patterns. The authors also find that combining value and momentum strategies produces higher returns and Sharpe ratios than either strategy alone. The study highlights the importance of examining value and momentum strategies across diverse markets and asset classes to understand their common factor structure and economic drivers. The authors conclude that their findings challenge existing asset pricing theories and suggest that value and momentum strategies are more robust across different asset classes and markets.Asness, Clifford S., Tobias J. Moskowitz, and Lasse Heje Pedersen (2013) examine the returns of value and momentum strategies across eight diverse markets and asset classes. They find consistent value and momentum premia in every asset class and strong common factor structure among their returns. Value and momentum are more positively correlated across asset classes than passive exposures to the asset classes themselves, but negatively correlated within and across asset classes. The authors propose a three-factor model that captures global returns across asset classes, the Fama-French U.S. stock portfolios, and hedge fund indices. They find that liquidity risk is negatively related to value and positively related to momentum globally. Funding liquidity risk is a partial source of these patterns, which are identifiable only when examining value and momentum simultaneously across markets. The authors challenge existing behavioral, institutional, and rational asset pricing theories that focus on U.S. equities. They find that value and momentum strategies are negatively correlated with each other within and across asset classes, suggesting the presence of common global factors. The authors also find that value and momentum strategies are negatively correlated with liquidity risk, implying that part of the negative correlation between value and momentum is driven by opposite signed exposure to liquidity risk. The evidence suggests that value and momentum premia are driven by common global factors, and that liquidity risk is a partial explanation for these patterns. The authors also find that combining value and momentum strategies produces higher returns and Sharpe ratios than either strategy alone. The study highlights the importance of examining value and momentum strategies across diverse markets and asset classes to understand their common factor structure and economic drivers. The authors conclude that their findings challenge existing asset pricing theories and suggest that value and momentum strategies are more robust across different asset classes and markets.