Momentum A Contrarian Case for Following the Herd by Tom Hancock GMO.pdf by Tom Hancock GMO is interesting. 

ABSTRACT:

Price momentum has a long history as a successful stock selection strategy. At GMO we are somewhat neutral parties on momentum. On the one hand, our core investing philosophy is one of valuation and reversion to the mean, but on the other, we have been using various forms of momentum since the late 1980s to complement our valuation-based stock selection strategies. The basic thesis behind momentum investment strategies is that leadership within the market persists for enough time that, on average, one can beat the market simply by rotating into stocks that have been outperforming. For value managers, attending to momentum also moderates the pain that seems to come all too frequently with being both too early to buy and too early to sell. The historical success of momentum has continued well beyond when the effect was first documented, and thus the strategy has won widespread, if somewhat grudging, respect and adoption from investors over the years. It is a mainstay of quantitatively managed portfolios, but it is also a strategy that is indirectly employed by many more “fundamental” investors. Price momentum has succeeded in the face of a couple of intuitive objections. One is that buying winners inherently conflicts with a contrarian philosophy that is deeply ingrained within many successful investors. The second is that the simplicity of analysis needed to build a portfolio is troubling to adherents of the belief that markets are at least reasonably efficient. While the skeptics may lurk in the shadows when the strategy is successful, they are eager to speak up when momentum fails. And it is hard for the practitioners of a momentum strategy to launch a vigorous defense while looking foolish for having recently lost money with a portfolio of stocks bought simply on the basis of having recently gone up.