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Momentum Loses its Momentum: Implications for Market Efficiency

50 Pages Posted: 16 Jan 2015 Last revised: 6 Jun 2016

Debarati Bhattacharya

Palumbo Donahue School of Business, Duquesne University

Raman Kumar

Virginia Polytechnic Institute & State University - Pamplin College of Business

Gokhan Sonaer

Duquesne University

Date Written: November 7, 2012

Abstract

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.

Keywords: Momentum, Market Efficiency

JEL Classification: G10, G14

Suggested Citation

Bhattacharya, Debarati and Kumar, Raman and Sonaer, Gokhan, Momentum Loses its Momentum: Implications for Market Efficiency (November 7, 2012). Midwest Finance Association 2012 Annual Meetings Paper. Available at SSRN: https://ssrn.com/abstract=1928764 or http://dx.doi.org/10.2139/ssrn.1928764

Debarati Bhattacharya

Palumbo Donahue School of Business, Duquesne University ( email )

600 Forbes Ave.
Pittsburgh, PA 15282
United States
412.396.2621 (Phone)

HOME PAGE: http://www.duq.edu/academics/schools/business/faculty/bhattacharya-phd-debarati

Raman Kumar

Virginia Polytechnic Institute & State University - Pamplin College of Business ( email )

Dept. of Finance, Pamplin 2126
Blacksburg, VA 24061
United States
540-231-5700 (Phone)
540-231-3155 (Fax)

Gokhan Sonaer (Contact Author)

Duquesne University ( email )

600 Forbes Avenue
Pittsburgh, PA 15282
United States
4123964315 (Phone)
4123964764 (Fax)

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