An analysis on the predictability of CAPM beta for momentum returns

摘要

This paper demonstrates that the forecasted capital asset pricing model (CAPM) beta of momentum portfolios explains a large portion of the return, ranging from 40% to 60% for stock-level momentum, and from 30% to 50% for industry-level momentum. Beta forecasts are from a realized beta estimator using daily returns over the prior year. Periods such as 1969-1989 have been found in earlier studies to contain abnormal profits from momentum trading; however, we show that these were spuriously generated by measurement error in systematic risk. These results cast further doubt on the ability of standard momentum trading strategies to generate abnormal profits.