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Trees Do Not Grow to the Sky: Reversals in a Stock Market

  • Adam Zaremba
  • Jacob “Koby” Shemer
Chapter

Abstract

While the momentum strategy assumes the continuation of the price movement, the reversal strategies rely on a contrary assumption: predicting the price trend to revert. How can both the phenomena coexist? The solution is the investment horizon. While the momentum effect arises in the mid-term (3–12 months), the reversal occurs either in the short term (1 month) or in the long term (3–5 years). This chapter thoroughly discusses both the sources and implementation of reversal strategies in financial markets. The authors also showcased various improvements to the reversal strategies providing vast theoretical and empirical evidence in their support. Finally, they individually tested the reversal techniques across 24 different equity markets.

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Copyright information

© The Author(s) 2018

Authors and Affiliations

  • Adam Zaremba
    • 1
  • Jacob “Koby” Shemer
    • 2
  1. 1.Poznan University of Economics and BusinessPoznanPoland
  2. 2.AlphaBetaTel AvivIsrael

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