We evaluate the importance of “Limits to Arbitrage” to explain profitability of momentum strategies. Specifically, when the availability of arbitrage capital is in short supply, momentum cycles last longer, and breaks in momentum cycles are shorter. We demonstrate the robustness of our...

We evaluate the importance of "Limits to Arbitrage" to explain profitability of momentum strategies. Specifically, when the availability of arbitrage capital is in short supply, momentum cycles last longer, and breaks in momentum cycles are shorter. We demonstrate the robustness of our findings...

We find that price momentum in stocks was a pervasive phenomenon during the Victorian age (1866-1907) as well. Momentum strategy profits have little systematic risk even at business cycle frequencies; disappear periodically only to reappear later; exhibit long run reversal; and are higher...

We evaluate the importance of "Limits to Arbitrage" to explain profitability of momentum strategies. Specifically, when the availability of arbitrage capital is in short supply, momentum cycles last longer, and breaks in momentum cycles are shorter. We demonstrate the robustness of our findings...

A major problem in finance is to understand why different financial assets earn vastly different returns on average. In this paper, we survey various econometric approaches that have been developed to empirically examine various asset pricing models used to explain the difference in cross...

Momentum strategies exhibit rare but dramatic losses (crashes), which we show are a result of the leverage dynamics of stocks in the momentum portfolio. When the economy is in a hidden turbulent state associated with a depressed and volatile stock market, the short-side of the momentum portfolio...

Price momentum strategies have historically generated high positive returns with little systematic risk. However, these strategies also experience infrequent but severe losses. During 13 of the 978 months in our 1929-2010 sample, losses to a US-equity momentum strategy exceed 20 percent per...