Momentum strategies

Louis K.C. Chan, Narasimhan Jegadeesh, Josef Lakonishok

Research output: Contribution to journalArticlepeer-review


We examine whether the predictability of future returns from past returns is due to the market's underreaction to information, in particular to past earnings news. Past return and past earnings surprise each predict large drifts in future returns after controlling for the other. Market risk, size, and book-to-market effects do not explain the drifts. There is little evidence of subsequent reversals in the returns of stocks with high price and earnings momentum. Security analysts' earnings forecasts also respond sluggishly to past news, especially in the case of stocks with the worst past performance. The results suggest a market that responds only gradually to new information.

Original languageEnglish (US)
Pages (from-to)1681-1713
Number of pages33
JournalJournal of Finance
Issue number5
StatePublished - Dec 1996

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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