The Fading Abnormal Returns Of Momentum Strategies

The authors find increasingly large variations in returns from momentum strategies in recent years. Momentum strategies did not earn significant excess returns during the period of 1993-2004 which was due to their poor performance over the period from 2001-2004. Using sub-samples of smaller capitalization stocks increases momentum portfolio returns and reduces return volatity. They also evaluate momentum portfolios that are formed prior to the end of month portfolio formation universally used in the academic literature.