The illusory nature of momentum earnings
The dimension and B/M portfolios are properly diversified, so momentum cannot be attributed to firm- or business-specific returns. Further, trade, size, and B/M portfolios are negatively autocorrelated and cross-serially correlated over intermediate horizons. The proof means that shares covary “too strongly” with one another. I argue that excess covariance, not underreaction, explains momentum in the
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