Momentum Index

1. Should AQR launch the Momentum Funds? Why or why not?

2. How important do you think it is that AQR establish a momentum index at the same time they launched their funds?

3. What do you think are the appropriate benchmarks for the AQR Momentum Funds? Do you believe the net performance of the Funds will exceed those benchmarks? Why or why not?

4. Does momentum make an attractive product for mutual fund investors? Are other quantitative strategies attractive mutual fund products? If so, which?

5. How important do you think the constraint is that the funds are long-only and do not allow short positions? Is this likely to be more of a concern for momentum than other quantitative strategies?

6. If AQR launches the Momentum Funds, how should they weigh maximizing returns vs. minimizing tracking error? How should they manage the portfolio?

Empirical Questions.

1. Do you believe the Fama-French MOM factor will have returns over the next decade that are significantly greater than zero, significantly less than zero, or approximately zero? Use the historical data provided in both sheets of the electronic case materials, and be prepared to argue your opinion.

2. Estimate the correlation between the return on the momentum and value portfolios. Is it on average positive or negative? How would you best recommend AQR use momentum in combination with VALUE?

3. AQR is thinking to introduce a new momentum index (IND_MOM) linked to industry specific returns. Using the data provided can you find evidence of momentum industries? If so, what would have been the returns on this index over

the last decade compared with the standard Fama-French MOM factor? What is the correlation between industry momentum and value? Should they consider running VALUE + MOM + IND_MOM fund? What issues should AQR