// STUDY RESULT · 1998-01 TO 2026-09

Inspired by Carhart: Momentum as a Fourth Factor

NO EDGE

Adding 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.

How this run differs from the source: Carhart's momentum is a regression factor in a mutual fund study; this is a long-only top 20 book, not his test.

	THE STRATEGY	$SPXTR BUY & HOLD
CAGR	2.3%	9.3%
Sharpe ratio	0.26	0.66
Max drawdown	-86.8%	-50.9%

// GROWTH OF $1, LOG SCALE

AMBER: THE STRATEGY · GREY: $SPXTR BUY & HOLD

Out-of-sample (from the split): CAGR -5.0% against 14.0% for the benchmark; Sharpe 0.38 in-sample, 0.06 out-of-sample.

After 25 bps of trading costs: -0.0% a year. BELOW RANDOM

// DECADE BY DECADE

ERA	STRATEGY	BENCHMARK
1990s	202.7%	20.9%
2000s	-12.4%	-0.8%
2010s	1.8%	14.0%
2020s	-6.0%	15.2%

// YEAR BY YEAR, LOSING YEARS IN RED

1998*108.9%27.2%

1999293.4%21.0%

2000-56.4%-9.1%

200116.2%-11.9%

2002-11.5%-22.1%

2003107.8%28.7%

2004-4.8%10.9%

2005-2.4%4.9%

200610.8%15.8%

2007-20.7%5.5%

2008-49.8%-37.0%

2009-12.2%26.5%

20107.5%15.1%

2011-29.4%2.1%

201222.7%16.0%

201386.4%32.4%

2014-25.8%13.7%

2015-6.0%1.4%

2016-15.4%12.0%

201713.8%21.8%

2018-32.4%-4.4%

201941.4%31.5%

20208.0%18.4%

2021-17.9%28.7%

2022-6.3%-18.1%

202310.6%26.3%

2024-10.4%25.0%

2025-25.4%17.9%

2026*2.6%11.8%

Losing years: 2000 (-56.4%), 2002 (-11.5%), 2004 (-4.8%), 2005 (-2.4%), 2007 (-20.7%), 2008 (-49.8%), 2009 (-12.2%), 2011 (-29.4%), 2014 (-25.8%), 2015 (-6.0%), 2016 (-15.4%), 2018 (-32.4%), 2021 (-17.9%), 2022 (-6.3%), 2024 (-10.4%), 2025 (-25.4%). Each cell: the strategy, then the benchmark below it. * a part year.

// 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

RUN IT YOURSELF ▸ IN THE LIBRARY

A real computation on the QuantGPT warehouse, walk-forward. A study across the whole market includes only part of the companies that later delisted from 1998 (survivors only before); a study on your own list of tickers is not affected. Gross returns, no costs except where stated. Past performance is not a promise. Findings, not advice. COMPUTED 2026-11-07 08:41 ON THE QUANTGPT WAREHOUSE. COMPANIES THAT LATER DELISTED ARE ONLY PARTLY IN THIS UNIVERSE (A FIX IS IN PROGRESS), SO THE RESULT LEANS TOWARD SURVIVORS. FUNDAMENTALS BY FILING DATE. NOT INVESTMENT ADVICE. PRIVACY