Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency

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Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency

This paper documents that strategies which buy stocks that have performed well in the past and sell stocks that have performed poorly in the past generate significant positive returns over 3- to12-month holding periods. We find that the profitability of these strategies are not due to their systematic risk or to delayed stock price reactions to common factors. However, part of the abnormal returns generated in the first year  after portfolio formation dissipatesin the following two years. A similar pattern of returns around the earnings announcements of past winners and losers is also documented.

H/T noahpinionblog.blogspot.com

Implications for Stock Market Efficiency by ValueWalk.com

EXCLUSIVE: KG Funds Shuts Down After 13 Years Of Outperformance

After 13 years at the head of KG Funds, the firm's founder, Ike Kier, has decided to step down and return outside capital to investors. The firm manages around $613 million of assets across its funds and client accounts. According to a copy of the firm's latest investor update, Kier has decided to step down Read More

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