Performance Evaluation of Size, Book-to-Market and Momentum Portfolios

This article provides an extensive review on traditional and more sophisticated evaluation measures focusing on premium returns adjusted for the associated risk. The implementation of these performance measures on the HML, SMB, MOM, LT-Rev and ST-Rev empirical factors produces for first time a ranking of the aforementioned portfolios, revealing that the HML and MOM factor portfolios achieve the best and worst performance, respectively. This analysis goes one step further by implementing the same performance measures on portfolios formed by a specific characteristic, such as size, book-to-market or momentum, establishing thus a connection between these characteristics and portfolios’ performance. Our empirical findings suggest that the traditional and downside performance measures lead to identical rankings, whereas drawdown-based ones influence the rank order among the portfolios of interest.