Production Complementarity Peer Momentum
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Meb Faber
- Institut Mines-Télécom Business School
- ?Cambria Investment Management
Strategy in a nutshell
Invest in U.S. stocks based on top 2% production complementor returns. Go long high-return complementor stocks and short low-return peers. Value-weighted portfolio rebalanced monthly with six-month formation gap.
Economic rationale
Delayed attention to production complementors’ fundamentals creates return spillovers. Investors’ inattention, stronger economic linkages, and higher arbitrage risk drive predictable momentum effects across connected firms.
Backtest performance
Annualised return9.9%
Volatility19.34%
Sharpe ratio0.51
Win rate71%