What Explains Price Momentum and 52-Week High Momentum When They Really Work?

After long being one of the main puzzles in asset pricing, momentum has ironically become a case of observational equivalence. It can now be explained both by factors proxying for mispricing and by the investment CAPM. On top of this, q-factor theory also explains the related 52-week-high anomaly. We note that all these recent tests are unconditional exercises while the bulk of momentum profits are predictable and occur after periods of low-volatility. Comparing asset pricing models conditionally, when the strategies actually work, we find the unconditional fit is misleading. The models fit well most of the time but not when the profits are produced. The investment CAPM implies time-varying loadings that are inconsistent with the data. We proxy underreaction with earnings announcement returns and analyst forecast errors and find that it markedly decreases with volatility. This supports an underreaction channel as closer to the heart of both anomalies.