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Profitability of Momentum Strategies: An Evaluation of Alternative Explanations
Author(s) -
Jegadeesh Narasimhan,
Titman Sheridan
Publication year - 2001
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/0022-1082.00342
Subject(s) - profitability index , momentum (technical analysis) , economics , product (mathematics) , behavioral economics , econometrics , financial economics , microeconomics , mathematics , finance , geometry
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 1990s, 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 that are eventually reversed. Our evidence provides support for the behavioral models, but this support should be tempered with caution.