Relative strength over investment horizons and stock returns
In
this article, the authors propose a simple and novel measure of relative
strength over investment horizons that synthesizes short- and
intermediate-term price information. The relative-strength measure compares
the short-term price trend with the intermediate-term price trend. The
relative strength strategy generates substantial profits, which are greater
than a simple sum of traditional short-term reversal and momentum profits.
The superior performance of the relative strength strategy is evident after
risk adjustments for various factor models and is robust across subperiods
and different market conditions. These findings seem consistent with investor
conservatism and the idea that investors are slow to adjust to new
information. |