Competition And Momentum Profits
Author(s) Gerard Hoberg, Nitin Kumar, Nagpurnanand Prabhala


? point out that momentum is the premier anomaly confronting the finance profession. We develop a measure of buy-side competition for momentum investing and show that it explains abnormal returns from both price and earnings momentum. Both strategies are profitable when buy-side competition for exploiting profits from these strategies is low. Return and earnings momentum generate monthly alpha of more than 130 basis points and 40 basis points, respectively, when competition is low but neither strategy yields significant alpha when competition is high. We also present related evidence from the post-2008 momentum crash.

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