Simultaneous inference in testing conditional alphas of momentum portfolios

We evaluate the conditional performance of intermediate and recent past momentum portfolios using nonparametric estimation and simultaneous inference. The outperformance of intermediate past momentum is driven by the relative performance of winners. The largest contributors to the outperformance are negative and positive exposures of the intermediate and recent past momentum to the value factor, respectively, which are strengthened when the market risk premium is high and coincide with the significant outperformance of the intermediate momentum. These contrasting signs of exposures are robust to a sub-period analysis and controls for the January effect. The outperformance disappears when prior Months 12 and 2 are excluded from constructing the momentum portfolios, due to changes in losers’ returns. However, the opposing exposures to the value factor remain consistent.