Is Momentum an Echo?

Abstract

In the U.S., momentum portfolios formed on returns from 12 to seven months prior to the current month deliver higher returns than momentum portfolios formed from six to two months prior, suggesting an “echo” in returns (Novy-Marx (2012)). In 37 countries not including the U.S., there is no such echo. In portfolios that combine securities in developed and emerging markets, there is also no echo. Any echo in the U.S. appears to be driven largely by a carryover of short-term reversals from month −2.

Keywords: Momentum, Market Efficiency, Return Predictability

JEL Classification: G12, G14, G15