The Academics Chime In
A recent piece of research titled Research Reveals Why Some Stocks Keep Winning, While Others Keep Losing (PDF) outlines new academic thought on momentum trading. An excerpt:
“A new study suggests that investor psychology plays a big role in why stock prices show strong momentum - the tendency for prices to continue in the same direction, either rising or falling. Theoretically, with the information in this model, investors could measure price momentum more efficiently and earn more in the stock market, [Bing] Han said, [assistant professor of finance at Ohio State University's Fisher College of Business].”
How in the world is this news? Have trend followers not been taking advantage of momentum for decades to make money? This professor is only at the “theoretical” stage, when trend followers have been living these concepts to the tune of billions in profits for some time. Don’t get me wrong, I have not yet read the research and do not mean to denigrate the professor, but when the press is pushing this “angle” it makes me wonder how they can imply “new” or “breakthrough” with this research.
