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Finding Bargains Among Emerging Markets Bond CEFs

Summary The discounts associated with emerging markets CEFs are at historic highs, with many discounts over 2 standard deviations from the mean. Emerging markets CEFs have been significantly more volatile than their ETF counterparts. ESD, EMD and MSD had the best risk-adjusted performance among the CEFs analyzed. Over the past several weeks, I have been writing about potential bargains among Closed End Funds (CEFs). This week I will continue the series by analyzing the risks and returns associated with Emerging Markets (NYSE: EM ) Bond CEFs. Before jumping into the analysis, I will provide a quick review of some of the characteristics of this asset class. The term emerging market refers to securities domiciled in a country that is considered to be emerging from an under-developed economy to a more mainstream environment. These countries are typically in Africa, Eastern Europe, the Middle East, Latin America, and some Asian countries. Many of these economies depend on either exporting commodities or providing services to the more developed world. There are several subclasses of EM bonds. For example, EM bonds may trade in either the currency associated with their country or trade in U.S. dollars. In addition, EM bonds may be corporate bonds or government treasuries (which are usually referred to as sovereign debt). Some of the reasons for investing in the bonds of emerging markets include: EM bonds offer higher yields than comparable bonds from developed countries. As the credit worthiness of an emerging economy improves, the rating of the bonds may improve leading to capital gains. EM bonds rise and fall due to local conditions, which may not be in sync with the U.S. market, thus offering diversification. If the EM bond is denominated in local currency, there is a potential for additional appreciation due to currency fluctuations. Of course, depreciation is also a possibility (which has happened recently). Since many EM bonds are thinly traded and are available only on local exchanges, it is difficult for individual investors to purchase these bonds individually. The easiest way to invest in this asset class is to buy funds. Exchange Traded Funds (ETFs) are the most popular vehicle with some ETFs trading over 700,000 shares per day. However, Closed End Funds (CEFs) are an alternative choice. The closed nature of these CEFs makes it easier for the manager to invest and hold limited liquidity assets without having to worry about cash inflows and outflows. However, the downside of CEFs is that the price is based on market action, which can wreak havoc when the asset falls from favor. This has been demonstrated with a vengeance since the second quarter of 2013 when talk of the Fed increasing rates led to a collapse of prices of these CEFs. As prices deteriorated, the discounts of these CEFs widened to historical large levels, many over 18%. This is evidenced by a large negative Z-score, a statistic popularized by Morningstar to measure how far a discount (or premium) is from the average discount (or premium). The Z-score is computed in terms of standard deviations from the mean so it can be used to rank CEFs. A Z-score lower (more negative) than minus 2 is a relatively rare event, occurring less than 2.25% of the time. However, in today’s environment, most of the EM CEFs have a one year Z-score of negative 2 or lower, which illustrates the current lack of demand for these CEFs. There are several reasons that investor lost confidence in emerging markets: The dollar has been in a bull market, which means that emerging markets currencies are becoming weaker versus the dollar. The Fed may finally begin to tighten in the near future, which will again strengthen the dollar. Commodities are in a bear market and many emerging market economies depend on the sale of commodities. When commodities swoon, so do these economies, putting pressure on their bonds. China is the largest emerging market and turmoil in China has crushed some of the lesser economies Has the rout in emerging markets gone too far? I believe in the wisdom of Warren Buffet when he opined: “Be greedy when others are fearful.” I am not clairvoyant and have no idea how long it will take the EM bonds to recover. Some bonds may default, but on a whole I believe a diversified basket of EM bonds will be a smart investment. If you decide to invest in this type of bond, the question is: what are the “best” funds to purchase? There are many ways to define “best.” Some investors may use total return as a metric but as a retiree, risk is as important to me as return. Therefore, I define “best” as the asset that provides the most reward for a given level of risk and I measure risk by the volatility. Please note that I am not advocating that this is the way everyone should define “best”; I am just saying that this is the definition that works for me. This article will compare the risks and rewards of EM bond CEFs. I will use a 5-year time frame and require that the selected funds trade an average of 50,000 shares or more per day. Based on these criteria, I included the following CEFs for my analysis: MS Emerging Markets Domestic (NYSE: EDD ). This CEF invests in emerging market domestic debt and sells for a discount of 18%, which is a much larger discount than the 5 year average discount of 10.1%. The one year Z-score is minus 2. This is the only leveraged fund that invests exclusively in local currency debt. The fund has 46 securities, almost all in sovereign debt. Even though the bonds are from emerging markets, about 67% are actually investment grade (BBB or higher). The fund invests in a wide range of countries including Brazil (16%), Mexico (16%), South Africa (16%), Malaysia (15%), Poland (14%) and Turkey (14%). The fund utilizes 31% leverage and has an expense ratio of 2.2%. The distribution rate is 12.5 %, which is funded by income with some Return of Capital (NYSE: ROC ) in one quarter over the past year. The Undistributed Net Investment Income (UNII) is negative and is large when compared to the distribution, which is a concern. MS Emerging Markets Debt (NYSE: MSD ). This CEF sells for a discount of 18.5%, which is a larger discount than the 5 year average discount of 10.8%. The one year Z-score is minus 2.6. The fund has 115 holdings, with about 51% in sovereign debt and 46% in corporate bonds. Virtually all the bonds are denominated in U.S. dollars. Geographically, the holdings are distributed among a large number of countries including Mexico (13%), Indonesia (11%), Venezuela (7%), and Turkey (7%). About 41% of the bonds are investment grade. MSD uses 8% leverage and has an expense ratio of 1.2%. The distribution is 6.6% with no ROC. Western Asset Emerging Markets Debt (NYSE: ESD ). This CEF sells at a discount of 18.3%, which is a larger discount than the 5 year average discount of 8.6%. It has 240 holdings with 51% in sovereign debt and 42% in corporate bonds. The assets are distributed among several countries including Mexico (13%), Indonesia (11%), Turkey (7%), and Venezuela (7%). About 69% of the portfolio is investment grade. The fund uses 16% leverage and has an expense ratio of 1.2%. The distribution is 9.1%, consisting primarily of income and some ROC (about 10% of the distribution). UNII is negative but is less than one month distribution. Western Asset Emerging Markets Income (NYSE: EMD ). This CEF sells for a discount of 18.5%, which is a larger discount than the 5 year average discount of 8.6%. The one year Z-score is minus 2.2. The fund has 235 holdings with 53% in sovereign debt and 42% in corporate bonds. About 73% of the holdings are investment quality. The assets are distributed among several countries including Mexico (12%), Indonesia (9%), Turkey (9%), Netherlands (6%), and Peru (5%). The fund utilizes 14% leverage and has an expense ratio of 1.3%. The distribution is 8.5%, consisting primarily of income with about 30% ROC but the UNII is positive. Global High Income Fund (NYSE: GHI ). This CEF sells for a discount of 13.6%, which is a larger discount than the 5 year average discount of 7.3%. The one year Z-score is only minus 0.1. The fund has 308 holdings, with 66% in sovereign debt and 26% in corporate bonds. All the holdings are denominated in U.S. dollars. The holdings are distributed among a large number of countries including Brazil (11%), Turkey (7%), Indonesia (8%), Mexico (6%), and Russia (5%). About 38% of the holdings are investment grade. This fund does not use leverage and has an expense ratio of 1.4%. The distribution is 10.9%, consisting primarily of income and ROC. The ROC occurred in about 60% of the months over the last year and comprised about 30% of the distribution. The UNII is positive. Templeton Emerging Markets Income (NYSE: TEI ). This CEF sells at a discount of 17%, which is a larger discount than the 5 year average discount of 1.5%. The one year Z-score is minus 2.4. This fund has 119 holdings with 56% invested in sovereign debt, 24% in corporate bonds, and 13% in short term debt. The securities are distributed across many countries including Iraq (11%), Indonesia (11%), Zambia (10%), Hungary 990%), and UAE (8%). The fund does not utilize leverage and the expense ratio is 1.1%. The distribution is 8.1%, consisting of income with no ROC. For comparison, I will also include the following ETF: iShares J.P. Morgan USD Emerging Markets Bond (NYSEARCA: EMB ). This ETF is a passive fund that tracks an index made up of U.S. dollar denominated emerging market bonds. The country allocations are rebalanced monthly, based on the amount of outstanding debt. The fund has 287 holdings with 78% in sovereign debt and 21% in corporate bonds. About 62% of the portfolio is investment grade. The holdings are spread across a large range of countries including Russia (6%), Philippines (6%), Turkey (5%), Indonesia (5%) and Mexico (6%). Overall, 28 countries are represented. The fund has an expense ratio of 0.40% and yields 4.5%. To assess the performance of the selected CEFs, I plotted the annualized rate of return in excess of the risk free rate (called Excess Mu in the charts) versus the volatility of each of the component funds over the past 5 years. The risk free rate was set at 0% so that performance could be easily assessed. This plot is shown in Figure 1. Note that the rate of return is based on price, not Net Asset Value (NYSE: NAV ). (click to enlarge) Figure 1. Risk versus reward over the past 5 years. The plot illustrates that the CEFs have booked a wide range of returns and volatilities over the past 5 years. To better assess the relative performance of these funds, I calculated the Sharpe Ratio. The Sharpe Ratio is a metric, developed by Nobel laureate William Sharpe that measures risk-adjusted performance. It is calculated as the ratio of the excess return over the volatility. This reward-to-risk ratio (assuming that risk is measured by volatility) is a good way to compare peers to assess if higher returns are due to superior investment performance or from taking additional risk. In Figure 1, I plotted a red line that represents the Sharpe Ratio associated with EMB. If an asset is above the line, it has a higher Sharpe Ratio than EMB. Conversely, if an asset is below the line, the reward-to-risk is worse than EMB. Note also that Sharpe Ratios are not meaningful if a stock has a negative return. Some interesting observations are evident from Figure 1. The CEFs were substantially more volatile than the ETF. This was expected since CEFs are actively managed, may use leverage, and may sell at discounts or premiums. All of these attributes tend to increase volatility. The EM CEFs did not have great performance over the period. EM bonds have been in a bear market since 2013 and the prices associated with CEFs decreased faster than Net Asset Value . Since EMB is an ETF that does not sell at a discount, EMB has much better risk-adjusted performance than any of the CEFs. Looking only at the CEFs, MSD had the best performance followed by ESD and EMD. The other three CEFs were underwater for the period. Next I wanted to see if the diversification promised by these emerging markets bonds lived up to expectation. To be “diversified,” you want to choose assets such that when some assets are down, others are up. In mathematical terms, you want to select assets that are uncorrelated (or at least not highly correlated) with each other. I calculated the pair-wise correlations associated with the selected funds. The results are provided in Figure 2. As is evident from the figure, these CEFs provided relatively good diversification with correlations in the 50% to 60% range. Thus, these CEFs did provide good portfolio diversification. (click to enlarge) Figure 2. Correlation over past 5 years. The 5 year look-back data shows how these funds have performed in the past. However, the real question is how they will perform in the future when the bull market in EM debt returns. Of course, no one knows, but we can obtain some insight by looking at the most recent bull market period from March 2009 to January, 2013. Figure 3 plots the risk-versus-reward for the funds over this bull market time frame. (click to enlarge) Figure 3. Risk versus reward during a bull market As expected, all the funds had excellent performance over this bull market period. The CEFs all had higher absolute returns than EMB but were also significantly more volatile. When volatility was taken into account, EMB was still a leader in risk-adjusted performance. However, during the bull market, EMD matched EMB in risk-adjusted performance and ESD, TEI, and MSD were not far behind. EDD and GHI continued to lag the other funds. Bottom Line If you are a risk-adverse investor who wants to diversify into emerging market bonds, EMB would be your best bet. However, if you want to take advantage of the wide discounts associated with CEFs, I would recommend ESD, EMD and MSD. These three CEFs had good performance over the entire 5 year period plus will likely excel if the bull returns. When this asset class returns to favor, I would expect the discounts to revert back to the mean and this would provide some capital gains to go along with attractive distributions. But beware, emerging markets CEFs are not for the faint hearted. Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in ESD,EMD, MSD over the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Stable Belgium Can Give A Decent Profit

Summary EWK, an ETF based on Belgian shares, has significant relative strength. There are no serious threats to the Belgian economy. Government crisis and bankruptcies in the banking sector are in the distant past. The iShares MSCI Belgium Capped ETF (NYSEARCA: EWK ), based on the shares of Belgian companies, ranks extremely high in the ETF World Matrix with Cash list, edited by investment company Dorsey Wright. To gauge whether this extremely interesting ETF’s ranking is justified, it’s worth looking at what exactly the situation in the Belgium economy is like. First, we should explain how the ranking is done. Dorsey Wright compares selected ETFs with each other (one each for each). There are 34 ETFs that are ranked. The main factor is relative strength of each fund. Relative strength tells us how much the price of the company (or of the fund) grows in comparison to other companies (funds). The relative strength indicator, in conjunction with fundamental analysis is quite effective. Why? On the stock exchange, there is a principle of inertia: a company (or fund) that is growing strongly is hard to stop. Below, you can see top of the World ETF Matrix with Cash ranking order. EWK is in third position. The Guggenheim S&P 500 Equal Weight ETF (NYSEARCA: RSP ) is ranked first and the iShares Dow Jones U.S. ETF (NYSEARCA: IYY ) is second. (click to enlarge) Source: Dorsey Wright So, let’s take a glance at the fundamental situation in Belgium. The Political Situation The political situation in Belgium is now stable. Charles Michel has been at the helm of the government since 11th October, 2014. The Kingdom of Belgium is a federal parliamentary democracy under a constitutional monarchy. It is divided into 3 regions: Brussels – the Capital Region, the Flemish Region and the Walloon Region. Since 1993, there are three levels of government (federal, regional, and linguistic community). In 2012, the sixth state reform transferred additional competencies from the federal state to the regions and linguistic communities. It is worth recalling that a few years ago, Belgium was without a viable government due to a political deadlock between the Flemish and Walloons . This political crisis had paralyzed the country’s political apparatus from June 2010 till December 2011 (for 589 days, Belgium was without a federal government). In this period, the 20 biggest companies index, BEL20, went down 23%, and the 10-year bond yield went up from 3,097 to 5,910 (91%). Euronext Brussels BEL20 Index (BEL20) vs. BELGIUM 10-Year Bond Yield (10BEY.B) Source: Stooq The European Parliament is based in Brussels. For this reason, the city is often witness to protests. Economy and Finances Belgium is a small but highly urbanized and industrialized country. Poor in natural resources, it imports raw materials in great quantity and processes them largely for export. Exports account for around two-thirds of Belgium’s GDP. Almost 75% of its foreign trade is with other European Union countries, so the country is highly exposed to business tendencies in the EU. Belgium is the world’s most congested country, with drivers losing 51 hours a year , on average, to traffic jams (in Brussels, 74 hours). The cost of traffic jams in Belgium is 10.58 euros per hour , according to Leuven transport researcher Sven Maerivoet. Efficient mobility is a big problem for society of Belgium, and traffic jams are causing real harm to the economy. From Q2 2013, Belgium’s GDP growth rate is stable, but rather poor (0-0.5%). In Q2 2015, the country’s economy expanded 0.4% over the previous quarter. The indicator almost perfectly reproduces what is happening in the EU economy (please look at the chart below). The unemployment rate is projected to decrease from a ten-year high of 8.5% last year to 8.1% in 2016 as job creation in the private sector picks up – according to European Commission data. We can name it a “slow-moving recovery”. GDP growth rate: Belgium vs. the EU (click to enlarge) Source: Trading Economics What are the weaknesses of Belgium’ economy according to the European Commission’s “Country Report Belgium 2015” ? Chronic underutilisation of labour, with a low aggregate employment rate A high overall tax burden Competition in several key service sectors remains low One of the most interesting facts about Belgium’s labour market is presented at the chart below. Labour costs in the country are indirectly linked to productivity developments. Productivity and Wage Evolution (2009 = 100) It is no wonder that Belgium falls lower and lower on the index of economic freedom. Belgium – Index of Economic Freedom in 2015, Score: 68.8 (100 represents the maximum freedom) Source: Knoema What is worrying is that the country’s ability to make future payments on its debt is decreasing. Government debt as a percent of GDP (106.50% in 2014) is skyrocketing from 2008 and is higher than the EU average (92%). But what’s interesting is, it’s still below Belgium’s average level from years 1980-2014 (108.96%). Government Debt-to-GDP: Belgium vs. the EU (click to enlarge) Source: Trading Economics Public finances in Belgium are in a condition that is characteristic of those in almost all EU countries: poor, but stable. The country can only dream of having a budgetary surplus. (click to enlarge) We need to put a question mark on the 2015 budget. The Federal state budget deficit plan for 2015 was 8.50 bln EUR . As the end of July, it was 8.33 bln EUR. Yes, the budget deficit is seasonal (tax revenues are notably higher in the second half of the year than in the first half), but it seems that the first half of the year was a bit too wasteful. We should remember also that foreign investors own a majority of Belgium’s treasury certificates and linear bonds. This dependence makes the country very susceptible to a loss of market confidence. And what about ratings? Fitch Ratings : Rating AA affirmed, outlook negative (24/07/2015) S&P : Rating AA affirmed, outlook stable (17/07/2015) Moody’s : Rating Aa3 affirmed, outlook changed from negative to stable (07/03/2014) DBRS : Rating AA (high) confirmed, stable trend (13/03/2015) Japanese Credit Rating Agency : Rating AAA affirmed, outlook stable (01/07/2014) Rating and Investment Information, Inc . : Rating AA+ affirmed, outlook stable (31/08/2015) The Banking Sector In the years 2008-11, Belgium was struggling with a banking sector crisis, which revealed the incompetence of EU regulators and ratings agencies. In October 2011, the country nationalized big bank Dexia ( OTC:DXBGF ), which had passed stress tests year earlier. What’s the situation right now? KBC Bank ( OTCPK:KBCSF ) has repaid 7 bln EUR of federal loans, and it’s in good condition. Dexia is not an active bank. Fortis was rebranded as Ageas ( OTC:AGESF ), and is now an insurer (without toxic assets). What is interesting is that in the next three years, a great consolidation is expected in the Belgian banking sector – according to Ernst & Young’s “European Banking Barometer – 2015” presentation . According to the same report, Belgian bankers expect stabilization in the economy and in the banking market. The Real Estate Market If we look at the chart below, the bubble appears to be growing… (click to enlarge) … but property price levels remain moderate compared to those in other EU member states. Average price/m² of a 120 m² apartment located in the capital (in EUR) (BE – Belgium) Source: Global Property Guide Remember, of course, that in the charts above, we see the effects of extreme easing of monetary conditions in EU. Summary The political situation in Belgium is stable. The economy is in a slow recovery. Federal state finances are not in good shape, but where are they so (speaking about the EU)? The banking sector is recovering. Belgium does not stand out like on the plus side, but there are no serious threats for this country either. The investment mood has been very good, despite China’s fundamental problems. In fact, there are a few good reasons to invest in European equities . For example, quantitative easing provides support to consumption and money supply in the eurozone. Result? Better growth. Those who are already invested in the European and Belgian markets could patiently wait for further developments. For investors who like medium amounts of risk, invest in ETFs with exposure to Belgium. How to invest in the country There are some ETFs with exposure to stocks listed in Belgium. EWK has the largest exposure. 5 ETFs with the largest exposure to Belgium (click to enlarge) Source: ETFdb.com And here we have the most economical solutions: 5 cheapest ETFs with exposure to Belgium (click to enlarge) Source: ETFdb.com You may ask: Where is EWK in this ranking? Well, it’s in the 11th position, with ER = 0.47%. Not so bad. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

The Trouble With Momentum – And What To Do About It

Summary Growth stocks have outperformed value stocks in recent years, which is shining a spotlight on momentum. Unlike other investment factors, the momentum premium has been persistent since it was identified by financial academics in the 1990s. We believe that combining momentum with value and other factors within a multi-factor framework is a compelling way to address the challenge of tapping momentum profitably in a growth portfolio. It’s no secret that growth stocks have outperformed value stocks in recent years. For example, in the two years from September 1, 2013 to August 31, 2015, large cap growth stocks (as measured by the Russell 1000 Growth Index) returned 14.7% annualized vs. 9.6% annualized for value stocks (Russell 1000 Value Index). This pattern of outperformance has shone a spotlight on momentum , an investment factor that works particularly well in growth-stock investing. But making money by identifying growth stocks with momentum characteristics isn’t as easy as it sounds. In this column, I will explain why and briefly describe how Gerstein Fisher addresses some of the problems inherent in tilting a growth stock portfolio to momentum. Momentum: a Persistent Investment Factor First, let’s define what we mean by momentum. Momentum is the tendency for winning stocks (that is, stocks that have outperformed the market over the past three to 12 months) to keep winning and losing stocks to keep losing. First identified in papers co-authored in the early 1990s by Sheridan Titman, one of our Academic Partners, the momentum factor would seem to refute the weak form of the Efficient Market Hypothesis, which asserts that stock prices reflect all available information and that past price movements should be unrelated to future average returns. Momentum suggests that prior movements in price are in fact related to expected stock returns – that security prices essentially have memory, which students of statistics will recognize as serial correlation. Since those landmark studies in the 1990s, a number of other academic papers have established that a momentum strategy works not only in equity markets around the world (with the notable exception of Japan’s) but also in several other asset classes, including currencies and commodities. At Gerstein Fisher, we find that a momentum tilt works at least as well in our multi-factor real estate investment trust (aka REIT) portfolio as in our US and international growth equity strategies. Exhibit 1 shows the compound annualized returns from 1927 to 2014 for 10 portfolios formed on momentum (defined here as the one-year return skipping the most recent month). Investing in the highest past one-year return (i.e., highest-momentum) stocks generated a 16.9% annualized return, while the lowest decile of momentum lost 1.5% per year. Note the steady improvement in performance as momentum increases. (click to enlarge) Moreover, unlike some other investment factors identified by financial academics, momentum has remained remarkably robust and persistent. For instance, since the size premium for small cap stocks was identified in the early 1980s, it has shrunk dramatically (see my recent column for more on this phenomenon: ” Is the Small Cap Stock Premium Disappearing? “); similarly, the value premium has also sharply declined since Fama and French published their pioneering paper on it in 1992. Quite possibly, once seminal research is available in the public domain, quantitative investors target and thereby reduce the available premiums, although they still exist. But momentum seems to be different: our research shows that the strategy has remained profitable, generating a momentum premium of five to seven percentage points* even years after Prof. Titman’s groundbreaking papers in the 1990s. The Challenge for Momentum So if all of this academic and empirical evidence for momentum is present, then what’s the problem? For one thing, momentum stocks are also subject to short-term reversals, the tendency for stocks that have risen relative to the rest of the market in the last month to underperform those that have fallen relative to the rest of the market (for more on this topic, see our recently posted paper: ” Do past returns predict future returns? Evidence from Momentum and Short – Term Reversals “). In addition, the discipline and emotion-free decisions required to hold high-momentum winners and cut low-momentum losers every month are behaviorally difficult for many individual investors to make. Most importantly, there is a very large issue with turnover and transaction costs (and tax liabilities, if held in a taxable account) with a momentum growth stock portfolio. In short, without rules for controlling portfolio turnover, transaction costs will quickly devour a premium from a tilt to momentum (a monthly rebalanced, long-only momentum strategy may have a turnover of about 300%, implying a holding period of around four months). We believe that an effective approach to addressing the problem of excess turnover is by combining momentum, a so-called fast-moving factor, with value (which we may define, for instance, as a tilt to higher book-to-market stocks than the Russell 3000 Growth Index), a slow-moving factor. Combining these two negatively correlated factors in one portfolio provides factor diversification, which is a good thing since there are pronounced and different cycles to different factors. But we also find that by combining the signals of value and momentum, we can slow down portfolio trading dramatically and improve risk-adjusted performance, both relative to the index and compared to the sum of standalone value and momentum strategies-a typical advantage of a multi-factor strategy in one portfolio. We will soon publish our research on the optimum way to combine momentum and value in an academic journal. In the meantime, I invite you to read our working paper: ” Combining Value and Momentum “. Conclusion Growth stocks – and momentum – have been the source of strong performance in the stock market. The momentum premium is palpable but difficult to tap profitably in a growth portfolio. We believe that combining momentum with value and other factors within a multi-factor framework is a compelling way to address this challenge. *The momentum premium is defined as the returns of the highest 30% of large cap US stocks rated by momentum less the return of the lowest 30% of stocks rated by momentum. Data on momentum decile portfolios are taken from Ken French’s website. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.