See the research paper by Nicholas Barberis below. Barberis concludes that value and momentum are driven by biases that mirror one another. Value is driven by an overreaction problem in which humans are too quick to draw conclusions from a small amount of recent data. In contrast, momentum is driven by an underreaction issue, which is the opposite of verreaction. With underreaction, humans are slow to update their views based on new evidence, which could be due to a systematic behavior bias and/or due to the fact human beings simply have limited cognitive power.
A lot to ponder. I recommend Quantitative Investing by Wesley Gray. Momentum investing is NOT growth investing (buying price at high multiples to underlying fundamentals), because momenum investing is strictly based on recent price movements not fundamentals.
