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Profitability of CAPM Momentum Strategies in the US Stock Market

Author

Listed:
  • Chong, Terence Tai Leung
  • He, Qing
  • Ip, Hugo Tak Sang
  • Siu, Jonathan T.

Abstract

This paper provides a historical review of the performance of the risk-adjusted momentum strategies when buying and selling stocks according to the alpha estimates of the CAPM and Fama–French regressions. Our sample covers over 60 million US daily firm-return observations. High Sharpe ratios are obtained under our risk-adjusted strategies. It is also found that stock market crashes have no apparent impact on our momentum profits.

Suggested Citation

  • Chong, Terence Tai Leung & He, Qing & Ip, Hugo Tak Sang & Siu, Jonathan T., 2017. "Profitability of CAPM Momentum Strategies in the US Stock Market," MPRA Paper 80563, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:80563
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    File URL: https://mpra.ub.uni-muenchen.de/80563/1/MPRA_paper_80563.pdf
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    References listed on IDEAS

    as
    1. Chong, Terence Tai-Leung & Ip, Hugo Tak-Sang, 2009. "Do momentum-based strategies work in emerging currency markets?," Pacific-Basin Finance Journal, Elsevier, vol. 17(4), pages 479-493, September.
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    7. Narasimhan Jegadeesh & Sheridan Titman, 2001. "Profitability of Momentum Strategies: An Evaluation of Alternative Explanations," Journal of Finance, American Finance Association, vol. 56(2), pages 699-720, April.
    8. Jegadeesh, Narasimhan & Titman, Sheridan, 1993. "Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency," Journal of Finance, American Finance Association, vol. 48(1), pages 65-91, March.
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    11. Sagi, Jacob S. & Seasholes, Mark S., 2007. "Firm-specific attributes and the cross-section of momentum," Journal of Financial Economics, Elsevier, vol. 84(2), pages 389-434, May.
    12. Harrison Hong & Jeremy C. Stein, 1999. "A Unified Theory of Underreaction, Momentum Trading, and Overreaction in Asset Markets," Journal of Finance, American Finance Association, vol. 54(6), pages 2143-2184, December.
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    More about this item

    Keywords

    Momentum Strategies; Sharpe Ratio; Fama-French Model; CAPM Model.;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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