The authors study the effects of price and earnings momentum over the period 1973-1993 in the United States equity market. They find that winners over the past 6 months significantly outperform losers over the next 6-12 months.
Drilling in, they find that price momentum produces better returns for longer holding periods than earnings momentum. They contribute this to the theory that earnings is more of a short-term measure; whereas price changes could be due to very long-term changes. They even found these things to be true for large-cap stocks, which would be expected to not exhibit as much momentum capture due to their better and more public information than that of small-caps.
They contribute this effect to several possibilities: the market does not fully respond to new information, due to investors' conservatism bias (where they are reluctant to change prior opinions); or maybe by analysts being slow to revise estimates. They note that the momentum effect is not caused by the trades of trend chasers, because there is no subsequent reversal to bring the stock back to equilibrium (even out to the 3rd year).
Chan, L. K. C., Jegadeesh, N., & Lakonishok, J. (1999). The Profitability of Momentum Strategies. Financial Analysts Journal, 55(6), 80.
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