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Factor Crash Risk: U.S. Momentum Factor

Should investors be concerned about the recent strong factor performance?

Nicolas Rabener
10 min read
7 Sep 2026

SUMMARY

  • Concentrated momentum portfolios have recently generated extreme returns
  • The factor’s volatility provides a risk warning
  • Reminiscent of previous momentum crashes

INTRODUCTION

The MSCI South Korea Index generated an 80% return year-to-date, after rising by nearly 100% last year. In contrast, the annualized return from 2000 to 2024 was just 5.5%. Although the stock market often poorly reflects the economy, these returns are astonishing given South Korea’s GDP growth of about 1% last year and expectations of around 2% this year.

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