An analysis of the sources of momentum profits in the Spanish stock market

In this paper, we present a detailed analysis of momentum profits in the Spanish Stock Market, with special focus on its possible sources. As the evidence in other markets showed, we obtain that the momentum strategy yields important profits that can not be explained neither by the cross-section dispersion of the expected returns nor by a positive autocorrelation in the return generating factor/s. The phenomenon seems to be driven by a positive autocorrelation in the specific return component, which seriously questions the market efficiency hypothesis.