In this paper, we explain momentum profits using innovations in aggregate economy-wide default risk. First, we show that momentum returns are positive only during high default shocks and nonexistent otherwise. Second, we present evidence suggesting that a conditional default shock factor is...

Fama and French (2002) estimate the equity premium using dividend growth rates to measure the expected rate of capital gain. We use similar methods to study the value premium. From 1941 to 2002, the expected HML return is on average 5.1% per annum, consisting of an expected-dividend-growth...

We document a new pattern in stock returns that we call absolute strength momentum. Stocks that have signifi cantly increased in value in the recent past (absolute strength winners) continue to gain, and stocks that have signifi cantly decreased in value (absolute strength losers) continue to...