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Is momentum really momentum?

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  • Novy-Marx, Robert

Abstract

Momentum is primarily driven by firms' performance 12 to seven months prior to portfolio formation, not by a tendency of rising and falling stocks to keep rising and falling. Strategies based on recent past performance generate positive returns but are less profitable than those based on intermediate horizon past performance, especially among the largest, most liquid stocks. These facts are not particular to the momentum observed in the cross section of US equities. Similar results hold for momentum strategies trading international equity indices, commodities, and currencies.

Suggested Citation

  • Novy-Marx, Robert, 2012. "Is momentum really momentum?," Journal of Financial Economics, Elsevier, vol. 103(3), pages 429-453.
    • Handle: RePEc:eee:jfinec:v:103:y:2012:i:3:p:429-453
    DOI: 10.1016/j.jfineco.2011.05.003
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    References listed on IDEAS

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    More about this item

    Keywords

    Momentum; Factor models;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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