Profitability of Momentum Strategies: An Evaluation of Alternative Explanations / Narasimhan Jegadeesh, Sheridan Titman.

Format:

Book

Author/Creator:

Jegadeesh, Narasimhan.

Contributor:

National Bureau of Economic Research.

Titman, Sheridan.

Series:

Working Paper Series (National Bureau of Economic Research) no. w7159.

NBER working paper series no. w7159

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Profitability of Momentum Strategies

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1999.

Summary:

This paper evaluates various explanations for the profitability of momentum strategies documented in Jegadeesh and Titman (1993). The evidence indicates that momentum profits have continued in the 1990's suggesting that the original results were not a product of data snooping bias. The paper also examines the predictions of recent behavioral models that propose that momentum profits are due to delayed overreactions which are eventually reversed. Our evidence provides support for the behavioral models, but this support should be tempered with caution. Although we find no evidence of significant return reversals in the 2 to 3 years following the following formation date, there are significant return reversals 4 to 5 years after the formation date. Our analysis of post-hiding period returns sharply rejects a claim in the literature that the observed momentum profits can be explained completely by the cross-sectional dispersion in expected returns.

Notes:

Print version record

June 1999.