Are Momentum Strategies Still Profitable for U.S. Equity?
11 Pages Posted: 30 Oct 2011 Last revised: 22 Jul 2012
Date Written: October 14, 2010
This paper examines the performance of momentum strategies in previous years, and evaluates the effectiveness of the Fama and French 3-Factor Model and the Carhart 4-Factor Model in predicting momentum returns. Momentum strategies are less profitable after the time period considered in Jegadeesh and Titman (2001), and actually produce negative returns on average in the previous five years. The Fama and French 3-Factor Model performs well predicting returns for each individual portfolio constructed based off returns, but does poorly explaining the momentum strategy portfolio returns. Alternatively, the Carhart 4-Factor Model does a good job explaining the momentum strategy portfolio returns.
Keywords: Momentum Strategies, Fama French 3-Factor Model, Carhart 4-Factor Model
JEL Classification: G12, C50
Suggested Citation: Suggested Citation