Abstract
This paper examines the performance of momentum strategies in previous years, and evaluates the effectiveness of the Fama and French 3-Factor Model and the Carhart 4-Factor Model in predicting momentum returns. Momentum strategies are less profitable after the time period considered in Jegadeesh and Titman (2001), and actually produce negative returns on average in the previous five years. The Fama and French 3-Factor Model performs well predicting returns for each individual portfolio constructed based off returns, but does poorly explaining the momentum strategy portfolio returns. Alternatively, the Carhart 4-Factor Model does a good job explaining the momentum strategy portfolio returns.
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