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Trend Is Your Friend: Momentum Investing

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Abstract

The momentum effect is defined as a stock market tendency of assets with good past performance to continue to overperform in the future. Having comprehensively reviewed both the theoretical and empirical foundation, Zaremba and Shemer break down momentum strategies into standard momentum, intermediate momentum, moving averages, time-series momentum (absolute momentum), and technical analysis, additionally improving the strategies by sorts on liquidity, size, or book-to-market ratio. The momentum effect is typically explained by behavioral effects: anchoring, disposition effect, herd behavior, feedback trading, or confirmation bias.

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  1. Poznan University of Economics and Business, Poznan, Poland

    Adam Zaremba

  2. AlphaBeta, Tel Aviv, Israel

    Jacob Shemer

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Zaremba, A., Shemer, J. (2017). Trend Is Your Friend: Momentum Investing. In: Country Asset Allocation. Palgrave Macmillan, New York. https://doi.org/10.1057/978-1-137-59191-3_3

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