// STUDY RESULT · 1990-01 TO 2026-07
Momentum as a Fourth Factor (Carhart PR1YR)
NO EDGEAdding a one-year momentum factor to the Fama-French three factors, together with fund expenses and trading costs, almost completely explains persistence in mutual fund returns.
| THE STRATEGY | $SPX BUY & HOLD | |
|---|---|---|
| Growth a year (CAGR) | 3.2% | 9.0% |
| Return per unit of risk (Sharpe) | 0.26 | 0.66 |
| Worst fall (max drawdown) | -80.5% | -52.6% |
// GROWTH OF $1, LOG SCALE
AMBER: THE STRATEGY · GREY: $SPX BUY & HOLD
Tested on years it never saw (from the split): 5.8% a year against 12.4% for the benchmark; Sharpe 0.22 in the training years, 0.33 after.
After 25 bps of trading costs: 1.3% a year. BELOW RANDOM
// DECADE BY DECADE
| ERA | STRATEGY | BENCHMARK |
|---|---|---|
| 1990s | 10.9% | 15.5% |
| 2000s | -12.6% | -2.6% |
| 2010s | 9.6% | 11.6% |
| 2020s | 8.6% | 14.1% |
// THE IDEA, AS PUBLISHED
Carhart (1997), Journal of Finance · 1997
- Build PR1YR monthly: equal-weight top 30 percent minus bottom 30 percent of stocks by 11-month return lagged one month
- Universe: NYSE, AMEX and Nasdaq stocks, re-formed monthly
- Regress fund returns on market, SMB, HML and PR1YR to measure alpha and persistence
A real computation on the QuantGPT warehouse, survivorship-free, walk-forward. Gross returns, no costs except where stated. Past performance is not a promise. Findings, not advice. COMPUTED 2026-09-24 19:41 ON THE QUANTGPT WAREHOUSE: EVERY DELISTED NAME KEPT, FUNDAMENTALS AS FILED. NOT INVESTMENT ADVICE.