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

Has including ESG become a necessity for investors?

Clint CarlsonESG (environmental, social, governance) has become a hot topic in recent years, especially lately with the debate over whether pension funds should be able to factor in ESG when choosing investments. At Morningstar's recent conference, the firm argued that ESG has become a requirement for long-term investors. Q2 2020 hedge fund letters, conferences and more Read More