The Disappearance of Momentum

Abstract

We investigate the dynamics of the momentum premium in the US. The momentum premium is significantly positive only during certain periods, notably from the 1940s to the mid-1960s and from the mid-1970s to the late 1990s, and it has disappeared since the late 1990s. Our results further suggest that momentum profits have slowly disappeared since the early 1990s, in a process which was delayed by the occurrence of the high-tech and telecom stock bubble of the late 1990s. In particular, we estimate that the bubble accounted for at least 50% of momentum profits during the period from 1994 to 2000.

Keywords: Momentum premium, Arbitrage, High-tech and Telecom Bubble

JEL Classification: G12