Momentum Loses its Momentum: Implications for Market Efficiency
Virginia Polytechnic Institute & State University - Department of Finance, Insurance, and Business Law
Virginia Polytechnic Institute & State University - Pamplin College of Business
November 7, 2012
Midwest Finance Association 2012 Annual Meetings Paper
We evaluate the robustness of momentum returns in the US stock market over the period 1965 to 2010. We find that momentum profits have become insignificant since the late 1990s partially driven by pronounced increase in the volatility of momentum profits in the last 12 years. Past returns no longer explain the cross-sectional variation in stock returns, not even following up markets. The patterns in the post holding period returns of momentum portfolios and risk adjusted identification period buy and hold returns of stocks in momentum supports improvement in market efficiency as a possible explanation for the declining momentum profits.
Number of Pages in PDF File: 50
Keywords: Momentum, Market Efficiency
JEL Classification: G10, G14working papers series
Date posted: September 16, 2011 ; Last revised: November 8, 2012
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