Momentum Effect of Stocks Take the Stock Returns of 50 Firms in the U.S. as an Example

Abstract: This paper randomly selects 50 SP500 US CRSP companies to study the existence of momentum effects in these 50 companies from January 2010 to December 2020. The article uses the CAPM model and the Fama-French model to classify the 50 companies into 10 different portfolios according to the magnitude of the momentum effect and uses the Fama-Macbeth model combined with the momentum factor MOM to investigate whether there is a momentum effect for the 50 companies. The study reveals a momentum effect, evidenced by higher momentum portfolios generally demonstrating better risk-adjusted returns. The momentum effect is only significant when verified by the CAPM model. However, here is an opposite conclusion or it is not significant when verified by the Fama-French three-factor model and the Fama-Macbeth model. It may be because the sample is too small and selected randomly, which is a part of the paper that needs to be improved in the future.